I'm still hoping to get some traction by word of mouth and may skip the hunt on platforms like freelancer or oDesk.

I definitely think this is the right/ideal way to go. I'm hoping these kinds of sites will be a last resort for me.

I see freelancing as a vehicle to get insights into the pain certain industries or businesses are experiencing

Nicely put. For some reason most product ideas I've knocked about in my head haven't actually been related to embedded development (mainly desktop instead). But what you described is, in a way, a broader version of writing a shell script to do something because you've had to do it twice already and you don't want to do it by hand a third or fourth time.

I reached out to a lot of people

Can you go into detail on how you did this? Did you put together a list of local companies and make contact that way? If so, did you do this via phone, email, LinkedIn? How did people generally react to this?

met them for breakfast, lunch or dinner

So much nicer than regular meetings / interviews :-) More business should be done this way (apparently that's pretty common here in Spain as well)

Actually I like being on-site

Ha! I'm the opposite. Don't get me wrong... I very much enjoy the social and collaborative aspects of working in an office. But I'd much rather not have set work hours / days (flexitime isn't quite flexi enough) or a commute, and just work from home instead. My girlfriend tends to work evenings, so it's nice having the option of having the day together (or just free to do other stuff) and then being able to work later in the day. Or being able to go meet a friend at a moments notice because I feel like it, as well as (on the flip-side) being able to do an epic stretch of work into the night/morning because I'm having fun, with only a commute to the other side of the flat to face at the end.
The fact that I'm already enjoying this lifestyle means so much to me! (So obviously I'm rather keen on being able to continue it.)

Also I've actually found that I'm more disciplined when working this way. Without having a clear distinction between 'work' and 'free' times (eg. if I get up from my desk and end up chilling out in the sun for a bit, am I at work on a break or in free time?) I can use my time in a more free-form way. This seems to work for me, especially if I'm having trouble getting into the swing of something or feeling a bit unmotivated. I also find it lends itself well to 'micromanaging' myself and setting short term deadlines and milestones, more so than when working in an office. I think this has all very much aided by having a home office (rather than working in the living room / kitchen / bedroom), as well as an understanding, supportive girlfriend.

I'm trying to position myself as a trusted advisor for the public sector and provide eGovernment products and services.

Ah interesting. Have you had much experience in the public sector? Has that been your primary area of experience? Do you think that consulting in this area is often overlooked, with people instead focusing on the private sector? I've got no experience in the public sector so I don't really know how it compares.

Thanks again :-)