Yes, isn’t life wonderful? When we were going for ILR we couldn’t go to mainland Europe for the three months preceding the expiry of the FLR visa. Why because you cannot apply for a Schengen visa to visit Europe with only three months left on your FLR. Then as you rightly say when you do apply for ILR off go your passports for an extended holiday of two to three months, so no travelling out of the UK again! And if you did have to travel, say because of an emergency, and ask for your passports back, your application is withdrawn and you have to apply and pay again.
At least by using the Nationality Checking Service we can keep our passports and go off on a holiday to Thailand, but watch out, if you don’t respond in three weeks to any query they send you, then again they can cancel your application for citizenship and keep the fee.