Have solved the problem but not 100% sure of cause!

A gradually removal of controls from form until problem resolved, traced the problem to ctl32_balloontip from Carlos Alloatti. I have proved the point by undoing all othe rchanges that I have made.

If I add ctl32_balloontip at design stage then the form calling from MouseUp event causes the mouse problem. If I add ctl32_balloontip at runtime (Activate() method) then the problem does not occur.

Carlos uses bindevents and some API calls so I am guessing that some event binding is causing the issue, I'll let him know incase anyone else comes accross it.

Thanks to everyone for their input and help.

Gary.