I have resolved the issue!
The cause was a combination of two problems...
The cork clutch lining for the 'cone' (in the flywheel on the output shaft) was totally shagged - nearly as thin as paper. Took a whole 5mins to replace it.
The other thing I noticed when putting the engine back on after replacing the clutch lining was that, with the engine bolts partially in, the engine could be twisted in posistion ~5-10mm. This in turn affected the alignment of the output and drive shafts. By leaving the engine bolts loose and doing up the clutch housing fully, the shaft alignment was assured and it in turn determined the pisitioning of the engine and then the bolts could be tightened.
End result - everything runs beautifully now.
Ben.
