Devsdev
Your first assumptions is right, if you live close to a school and still don't get a place it does mean that the places have been allocated to siblings or children that live closer than you do. Apart from some special cases for 'looked after' children (those in care) the two main criteria for allocation of community primary school places are are siblings and distance (as the crow flies), in that order.

I am not sure it is always the case now that places seem to be so tight but there does always seem to be a little movement on waiting lists and places and so it can be worth holding on. Lewisham should be able to advise on this.