I have the same exact fork and had the same problem a few months ago. For me, it was the exact opposite of what vorsprung said, it was the damper oil leaking into the lowers. You will find out when you remove the lowers, there was a LOT of oil in mine. I replaced the o-rings around the baseplate and rebound shaft, problem solved.
This is another common situation, based on failure of the same seal, however the reason I suggested migration into the damper originally was that the OP said the damping adjustments were working correctly (though from a later post it would appear that isn't the case). As the damper loses oil into the lowers, the compression adjustments typically stop working at the start of the travel.
My understanding of hydro-lock was simply that there was too much oil (or contaminates) in the lower legs, I guess there's more at play. Sounds like I need to pull the fork apart today and have a closer look.
Hydro-lock can occur in any chamber (ie your lowers or your damper cartridge) that has too much oil in it. The easiest way to be certain which it is, is to drop the lowers. If more than ~15ml of oil comes out, you have damper oil in your lowers. If no oil comes out but the damper cannot be compressed fully whilst still in the stanchion, bath oil has migrated into your damper (this is particularly common in Fox FIT cartridges and many air spring systems).
Looks like you nailed it. Pulled the compression assembly, oil is approx 2.5cm below the bottom of the valve head - guess I know whats up now! Must have really let go in the last ride however since before yesterday the compression adjustment was working fine and while the fork felt a little funny, it wasn't a major issue.
So what exactly do I need to get this thing operational again?
Assuming that by valve head you mean the compression piston (opposite end of the assembly to the topcap), then your damper is losing oil either through the topcap (unlikely since you'd see it) or into your lowers. Drop the lowers and you'll know for sure.
In either case, the required work is the same - you need to replace the rebound seal head o-ring. You can purchase a Rockshox service kit (parts lists are in their relevant technical manuals on their website) and fully service your fork while you're at it, or for certain forks you can just buy the seal head itself (includes new o-rings) or you can get the o-ring from an industrial supplier provided you can accurately measure the size. If you haven't got experience measuring up seals, I would recommend just getting the service kit or seal head so you can be sure you've got the right parts.
If you're not comfortable doing the work yourself, feel free to hit us up, but if you don't want to mail your fork off, chances are there's a local shop who is capable of doing the work too (your location says you're in the Kootenays - Sacred Ride in Nelson would be a good start).
Hope that helps!