I've always through that one of the reasons for Hounslow being set up was that it was outside of London and hence outside of the control of the London Cutlers Guild. The LCG did have a role in quality but was also a bit of a closed shop. Set up some indigenous competition and you could bring prices down. James I got Thomas Murrey a patent as a producer of sword and rapier blades to try and expand production but the LCG said they weren't good enough.
London also didn't produce blades, it hilted and [forgotten the word for the trade of assembling - is it slipped?] added the other components to imported blades. That's why Stone was keen to get Charles to ban imported blades so he could obtain the monopoly.
On the mills being converted to gunpowder, I think this is about the realities of mid C17th warfare. A sword, unless you were cavalry, was a secondary weapon, whereas the ratio of muskeeters to pike had been increasing throughout the wars, so there was a great demand for gunpowder (which was also lifed, as it would separate into its component parts and need to be reconstituated). As Parliament controlled the navy, and had done so since 1642, it could fairly easily import swords.
The other problem was that the Germans at Hounslow wouldn't teach anyone else had to forge the blades. I think it was Jencks who said early on that 'never an Englishman can use the profession' (or similar) and promised to train up others, but it doesn't seem to have happened.
On Hounslow v London, I have a Wilhelm Tessche bladed mortuary sword which has 'Weirsburgh' on the blade, which is a suburb of Solingen. Not sure why the distinction, unless he was working for the Weyersberg family, one of whom was important enough to become mayor of Solingen.
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