>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.

Glad you found it!

One technique I've found useful in cases like this is a "binary (tree)" approach. If you have a lot of suspect controls, rather than removing one or two at a time and re-testing, you remove half of them. After testing, now you know which half contains the culprit. Then you halve that portion etc. That way you can quickly zoom in on the culprit with a relatively small number of test cycles.