Okay its all working again .. Thanks everyone for your kind assistance - This is what I had to do maybe someone will benefit from this?
Firstly davo, you were right my Win7 machine worked straight off (see below for one condition) but my win xp netbook was having none of it!
You need
1) tftp file for ls-vl (thanks davo for supplying this)
2) latest firmware update (i used 1.6) has lsupdater and a whole bunch of files in the archive
This is what i had to do
0.5) removed hdd from nas, connected to pc and deleted all partitions, resassemble
1) Direct cable connect between pc and nas (normal not crossover cable) - On Win7 machine disabled AV, firewall, wireless and set my TCPIP to 192.168.11.1 (router connection never worked, i think tftp packets were blocked)
2) switched on nas to where the 6 red lights where flashing
3) started up tftp
4) hit the function button (lights start flashing blue)
5) blocks were then sent (wait for solid blue light)
6) without switching off the nas i disconnect the network cable and plugged it in my router - did the same to pc, and set it again to dhcp - now both pc and nas were connected to router and on same subnet.
7) editted lsupdater.ini so that (NoFormatting = 0) othewise it will never format the drive
8) added section in lsupdater right at the bottom (to enable debug mode)
[SpecialFlags]
Debug=1
9) started lsupdater
10) very top left corner menu, chose debug (step 8 is needed to see this menu item)
11) ticked all boxes except "Execute change as following" (given you are using dhcp)
12) hit update (selected yes when promopted for formatting)
13) the nas then reboots, and lsupdater waits for it
14) the nas then reboots flashing 6 reds again .. dont worry normal
15) without switching anything off, direct connect pc to nas, remember to set ip to 192.168.11.1
16) start tftp
17) hit function button (lights flash blue)
18) blocks are sent, lights will flash amber see below
18.5) reconnect to router, change ip to dhcp
19) firmware update starts flashing (2 long amber followed by 5 short amber)
20) wait
21) wait
22) nas reboots - all ok .. yay..
Remember to turn av and firewall back on.
have a serious BIG beer... smile ... all done