I have tried to adjust the handbrake, but it has gone from working well but with excessive lever movement to less lever movement but no grip at all from the shoes (well, minimal grip - certainly not what it should be). I have obviously stuffed something up, but what?

I removed the shoes from the expander and cleaned them (and the drums) with metho. I lightly greased the expander tappets (certainly not enough to smear over the shoes) and reassembled the lot. I then tightened the shoes until they jammed the drum, and backed them off so the drum just turned freely (in fact a very light scraping noise can still be heard). I had the wheel nuts on the disc to ensure that the drum was properly located.

I am thinking that I need to set the shoe to a height appropriate to the drum, but what height and how do I do it?

Sounds like you have used the correct setup procedure for the adjustment. 5 clicks on the handbrake lever should give you full retardation on the handbrake.
Give it some time to bed down.
If no improvement pull the drums off and lightly sand the shine off the shoes and try again.

Madmax:
I checked on the Magna manual CD last night, and found for the TJ that they have a clip which holds the brake shoe up. I am so old and stiff that I cannot get down to have a look, but I did not feel anything like a clip at the bottom of the shoe. What holds the shoe in place, or is the clip only for later models?

The online manual says that you need to bed and centralise the shoes in basically by gently appling the handbrake (so there is some retardation) and driving a short distance and then doing the same in reverse. Wait for shoes to cool down.

Thanks for your replies. As yet, I haven't had a chance to bed in the shoes. My wife tried, but I suspect that she may not have done it correctly, so I'll go out and try again. Otherwise, it is off with the discs again and look for the clip andmaybe roughen up the shoe surfaces (loud groans).

Thanks for yuor replies. I have "burnt" the brakes in and they are working reasonably well now. The only thing is that the R wheel now sets up a high pitched squeal, but I will back the adjuster off a little and hopefully it will cure that.

Thanks for yuor replies. I have "burnt" the brakes in and they are working reasonably well now. The only thing is that the R wheel now sets up a high pitched squeal, but I will back the adjuster off a little and hopefully it will cure that.

Check how much disc brake pad there is left on that wheel, while it is off. Could be the pad wear indicator.