Building up a 12 tier mutations tree requires many ability points. Currently I require another seven points to
extend my tree. What confuses me is that only one mutation can be activated at any one time.
This seems to make all those mutations in the tree pointless. - or am I missing something regarding how this system works?

You can unlock extra ability slots by extending that tree.
You can get up to four extra slots, but it requires a lot of ability points and mutagens.
I'd say it's worth it if all your current slots are arleady filled with maxed out abilities.

The idea being is that you can pick and choose which mutation you want to be active. Unfortunately, you have to spend a lot of points to get to the "good" ones at the end of each tree.

This Mutation tree is mostly beneficial on your NG+ because that's the only way you'll have enough points to make it worthwhile...

Oops

The combat mutations I have include Bloodbath/ Deadly Counter/ Adrenalin Rush and Cats eyes.
So I am supposed to decide, prior to a fight, which one to activate or whether a signs mutation would be preferable.
This seems to be a bit of a hit and miss exercise, especially if you have no idea what horrors lie ahead.