Logfile attached as requested (just one note: I have just been trying MikTek 2.6 to see if it was any different from 2.7 - hence the notes in logfile which reference 2.6 - behaviour with 2.7 is identical).
Thanks for the prompt reply - just checked the date of the package - package is dated 15/04/2008 on the Package browser - looking at the headers in the caption.sty files it is dated 01/04/2008 v3.1h. So, I think I am using the latest.
I recently updated to Miktek 2.7 (from version 2.5) and have run into an issue using the Caption package - when I try and build my document I get the following error.