I knew it was a setting. Tools>Options>View>uncheck the picture placeholder box.
I have no idea how it got checked in the first place - probably some naff typing on my part!
This is where it gets a bit Oscar like because I would like to thank Lindy for giving the problem so much of her attention and time, John Campbell, the great digital artist, also for trying to find a solution - and see his fantastic photo art on http://home.fotocommunity.com/fotografx - the lovely folks in OUSA Hot Tips for their advice and, most of all, thank you to the great Al for finding the solution.
Phew . . .