Hi all just to complete the story here.
I got a replacement K-7 from Pentax a couple of weeks back, and I sent my Sigma 10-20 lens off to Sigma to be checked. Sigma said that they could not find a problem with the lens but would change the electronics in the lens (free of charge) because it could only be the electronics causing this sort of problem. Well I got the Sigma 10-20 back yesterday and took a deep breath and put it onto the K-7. I took half a dozen shots with the lens and it all seems to be working fine, what a relief

At last I have my replacement K-7 and this one works fine.
I am thinking about getting a Battery grip, but looking at the price it is very expensive £229 ish and £65 for an extra Battery.
Does anyone think these prices will come down over the next few months, they seem a long way out of line when compared with the K20 Battery and grip.

The final answer was , "send it back to Pentax", just waiting for my replacement to arrive.

Ok I have loaded the 1.01 firmware and I am still getting the same problem/

http://farm4.static.flickr.com/3004/3770010586_3ff31bbdff.jpg
http://farm3.static.flickr.com/2459/3770010574_3e037d0ae3.jpg

first with SR on 2nd with SR off.

On Page 134 of the Manual where it says Caution. One of the points mentioned in the list of situations when SR is turned off is "Mirror lock up shooting" I took this to be the same as going into Live view, as Live view effectively takes the mirror out of the way.

On the first pair the sharper one was taken using live view which turns the SR function off I believe.

I have loaded a couple more onto Flickr,at http://farm4.static.flickr.com/3489/3766437709_57a2b5e7ae.jpg
Exif now showing on for the blured one and off for the sharper one.

yes I did see that on the exif data, but the display on the camera definitely said it was off, Hand with red line through it.

http://farm4.static.flickr.com/3544/3766266709_3b06ccb64f.jpg

This is the one with SR on

I am using one of the kit Pentax lenses 18-55 that comes with the k-7
Yes I did wait for the hand

Not tried setting the focal length, but I shouldnt need to with the Pentax lense on I think.