Hi Angelo,
Sorry for the delayed response.
After a lot of testing, activating and deactivating plugins it appears to be a combination of two that are causing this problem.
Wordpress.com Stats and Wordpress Database Backup.
Details from PLugin list below:
WordPress.com Stats
Tracks views, post/page views, referrers, and clicks. Requires a WordPress.com API key.
Deactivate | Edit
Version 1.6 | By Andy Skelton | Visit plugin site
WordPress Database Backup
On-demand backup of your WordPress database. Navigate to Tools → Backup to get started.
Deactivate | Edit
Version 2.2.2 | By Austin Matzko | Visit plugin site
If either one of these are activated while the other is deactivated then there is no problem, but as soon as they are both active then the problem arises.
The workaround is that it is fine to deactivate the backup plugin while I create a new post, so it's not the end of the world.
Doesn't really point toit being a Powerpress bug rather than a php conflict somewhere.
I'll keep investigating to see if I can find anything more "enlightening" about this.
Thanks.