Thanks Pany, that's a viable solution assuming you are not restricted to deploying and testing on iOS10+ devices, which XCode7 doen't not support.
And did not upgrade to Sierra which in turn requires xCode 8. Unfortunately I am constrained by both of the above so that's not going to work for me.
I am now trying to use the Swift 2.3 toolchain in XCode 8.2 and enabling "Use Legacy Swift Code" to see if I have more luck with it, but it complains about the Swift 2.3 value being overridden by the TOOLCHAIN build setting (...).
Interestingly enough, it seems easier to use a variety of Swift toolchains on Linux than on MacOS (although I am sure that some fo you guys have managed a working toolchain with SimpleTunnel).
It could be useful to set up a Slack channel with all interested devs working on the Network Extensions: I've found that a life safer when working on Swift server side (PerfectServer across intermediate Swift3 snapshots) as it allows for instantanous sharing of knowledge / common troublshooting.
EDIT: I managed to make it work by using the "old" (Swift 2.x) code for the Project, built via XCode 8.2 with "Use lgacy Swift" enabled. That only required a few minor tweaks to update to Swift 2.3 and it works as expected. Still have to fix some nat configuration as I the server does not seem to be able to route the DNS response back to the tunnel interface (and therefore Safari on my iPhone cannot browse), but at least I can see the traffic running through.