I am somewhat disappointed to have received only one reply to this
message,

Perhaps no one could work out exactly what happened in your case.

On the outbound trip there is clearly an OSI and the end result is the
Senior Railcard discounted journey at £3.75 that Barry quoted, though I
didn't see where it was mentioned myself.

On the way back you were charged the Oyster PAYG off-peak single fare of
£3.90 from Ockendon to Fenchuch Street. Not sure why the £3.75 doesn't apply
in this direction but there you go.

It rather looks like an OSI wasn't applied and so your journey from
Liverpool Street to King's Cross was treated as a new single journey. The
fare would have been £1.80 but a Senior Railcard discount on the £14.20
off-peak price-cap gives £9.40 by my calculations and so it was capped to
£1.75.

The lack of an OSI hasn't actually changed the fare as it would have been
£5. 70 anyway which of course is the same as £3.90+£1.80.

So there are two issues he
1) Should there have been an OSI applied on your return journey?
2) Should the return journey have also been £3.75 like the outbound one?

Had it been £3.75 in both directions it would of course have totalled £7.50,
the same as a discounted 1-6 cap and a discounted Upminster-Ockendon return
(that National Rail site gives £2.50 as the cheapest discounted return
rather that the £2.70 you quoted).

so let me try something more general. Is it, or is it not, the case that
Oyster PAYG should always be the cheapest way to pay for a journey within
the area covered by Oyster PAYG? My impression is that Oyster has been
promoted in that way, but now I'm wondering whether that only applies to
LO and LU travel, i.e. excluding other 'National Rail' travel.

I certainly wouldn't use the word 'always' and I don't believe TfL do
either. I believe they acknowledge that there can sometimes be ways of using
paper tickets to save money given that Oyster PAYG doesn't have the concept
of a return ticket and doesn't discount single journeys, only caps.

Taking part of your example, without a railcard discount an off-peak single
from Upminster to Ockendon is £3.00 and a return is £3.80. Railcard
discounted the fares are £2.00 and £2.50. (Cheapest fares taken from the
National Rail site without actually checking for any limitations). The
Oyster PAYG is £1.90 each way according to TfL so it is cheapest for single
tickets, the same as the undiscounted paper ticket for a return, and more
expensive than a discounted return.

Now what would have happened if your Oyster PAYG journey was actually via
Upminster with touch-outs and touch-ins? Perhaps it would have been charged
at £5.00+£1.90+£1.90 = £8.80 compared to the £9.40 cap via Fenchurch Street.
An anomaly perhaps, but at the end of the day it isn't the same journey.