Figured it out!
IIS7 issues with setting permissions on the APP_DATA folder. Thats a good starting place.
My hosting providers said they had set the permissions properly. However when I created the appropriate folders manually in the ftp manager "APP_DATA/files/2010/7" It all magically started working!!! hmmmm. I Got back to them and asked them nicely
to check permissions on the APP_DATA folder again for ASPNET so when next month rolls around we'll see if this has been done!
Just sorted out SQL connection issues and I'm up and running!! :)