Your post mentions a William WOOD as a possible brother to James [born 14/15 Jun 1766], the father of William WOOD [m. 1827, d.1877]. James had siblings born in Little Dean as he was. Is Flaxley nearby --near enough for William born in 1765 in Flaxley to be an older brother to James?

Yes probably within a 2 mile radius

Also in the 1861 census in the Parish of East Dean where the Drew's were living is what looks like L. D. Hill - Little Dean Hill?? - is there such a place?

Yes

The question still remains - how to prove that the James WOOD who married Martha MASON is the one who was baptized 14/15 Jun 1766, son of James and Elizabeth.

Balance of probabilities looking good, absolute proof is often hard to establish