Well I found the fault.
I installed all the upgrades /patches etc but none of these made any difference to the problem of the lock ups when using the mouse.
I upgraded graphics drivers and flashed the M/b bios but no change.
I bought a copy of  FS2004 which I loaded and this was having the same problems when I went to "select flight"  and used the mouse to close screens etc.
It seemed that when a program with a high graphics content and running on Direct 8.2 or above I would get these problems.

I mentioned this problem to a friend at work who builds PC's for friends in his spare time and he told me he had a lot of trouble recently with Gigabyte M/Bs that ran socket 754 for AMD64 cpu and the problems he was having were exactly the same as mine.
He had to return the Gigabyte boards  and replace them with an Asus equilavent and the problem was fixed.

So I followed his advice and luckily the  shop I bought my Gigabyte board from agreed to swap it for an Asus.

So I went from a Gigabyte GA K8VT800 Pro to a Asus K8V-SE Deluxe and all the problems disappeared.

All other components and settings are the same and the whole PC is much more stable and CFS3 now is smooth as and no locks ups and I think my frame rate has increased as well. The same goes for FS2004 -no lock ups and frame rate is smooth and runs 80 +.

It looks like the Gigabyte boards have a problem with the Socket 754 format which is a shame because they usually make great M/b and are always my first choice but not this time.
cheers
chuck