Right, I think I've fixed it.
Initially I was running Avast and Kerio - I could not download (HTTP or FTP) and I also could not run Windows Update.
I disabled Kerio - with no luck, so I uninstalled and rebooted. Still no joy. I then uninstalled Avast and rebooted. I could download but could not get to windows update.
I then deleted all cookies, temp internet files etc and rebooted.
Windows Update then worked - I ran and updated my system.
I then reinstalled Avast - and all seems to be working well. I'm guessing some stuff was hanging around and I needed to sort that out + update my OS with the latest patches.
Im going to 'try' just the SP2rc1 Firewall instead of adding Kerio....
Thanks for the help.
Chris