It is indeed the constant regeneration cuased by frequent start/stop town driving.
The regenration works by injected extra fuel into the engine on the exhaust stroke (in addition to that injected during the ignition stroke). This extra fuel is supposed to vaporise and be exhausted, throught the DPF which contains a catalyst which, with the fuel vapour, burns off the soot particles in the DPF keeping it clean.
Unfortunately, not all the fuel vaporises, especially when the engine isn't fully warmed up, this un vaporised fuel remains in the cylinder, and drains down into the oil sump as the oil which lubricates the cylinder does.
thus, diluting the oil, obviously, the more the car regenerates, the more dilute the oil becomes.
the only solution is to either get a non-dpf car, or change your oil more frequently.
Mine's fairly bad for needing regen's, again, i do mainly cross town commutes of about 5 miles in start stop traffic, I always wondered why my oil level never went down despite other people reporting there new car was drinking oil like it was going out of fashion til I found the above out.
Re-reading, mine's no where near as bad as yours though. From a purely speculative PoV maybe your car needs some kind of ECU update to adjust the regen fueling characteristics/parameters so it doesn't kick in so frequently, though this would probably need to be done by SEAT HQ themselves.
Realistically, i think you should change the car for a petrol version as the ecomotive diesel obviosuly isn't right for the kind of use you require form it.