Solved: Alexa and muting AUX/bluetooth (will skill still enabled)
Reposting this here as it might help someone else. (my previous post was moved under an non relevant older post so it doesn't makse sense to post the update there).
I connected an Echo dot to my Soundtouch 20 speaker (I'm a Spotify user). I then enabled the Bose skill in my Alexa account and added the Soundtouch 20 to one of my groups. What I found was that when I spoke to Alexa the Soundtouch was muted so that I couldn't hear Alexa's reply. This happened regardless if I connected the Echo dot to the Soundtouch with Bluetooth or an AUX cable. Previous (archived) posts had suggested this issue could be resolved by disaabling the Bose Alexa skill. That however wouild leave me with out Alexa integration. (I wanted to be able to turn on and off the speaker via Alexa). I have now discovered that if you remove the Soundtouch from the group but leave the skill enabled, it won't mute the speaker when you ask Alexa something. If you are playing music the volumne will still drop as the Echo Dot itself (which is playing the music) will momentarily turn down the volume to hear your request.
This at least makes the Alexa Bose skill (The only one available in the UK) a bit more useful. Now if it only supported Spotify (the most used streaming service in Europe) .....