I decided the box had been messed with to much trying to diagnose the issues, So decided to do a fresh vanilla install with 8.04 LTS Server followed the guide to the latter then installed from the SVN.
Created a new domain added a user mailbox then sent it a test mail.
And w00t the Vmail directory now contains the folders as expected for the domain and user account.
So far so good, except the mail isnt in the users inbox ?
checked all services and amavis wasnt started (Problem with the hostname not being a fqdn) i edited the file /etc/amavis/conf.d/05-node_id to hard set the fqdn for the server (if the hostname was a fqdn to start with i might not of had this problem) Then started amavis service /etc/init.d/amavis start and a min later i HAVE MAIL
The only reason i post this is i have spent the last 2 days crawling the forum and looking at others problems and using them to try and diagnose the issues and wanted to lay out my route to a working install ^_^
On a good note i have a far better understanding of the setup structure now which can only be a good thing.
And thanks to all who offered help and solved problems in other threads leaving me a means to diagnose.