OK there are a few GOOD shops in London now. A year ago there were less.
First, I can recommend Creations in Barnes but it isn't on the web nor is it easy to get to. The problem with this store is, that it isn't always open. There is another Creations (same people) in Chiswick but I have not been there.
Stash is in Putney is highly recommended by many people who go there http://www.stashyarns.co.uk/
I have yet to venture all of Oooo the 2 miles or so it is from my home :P
Loop in Islington is meant to be very very very very good (and expensive).
In fact, why am I writing this list when theres a decent blog with all the London stores on it :