Shotgun, thanks for coming back for me. Story so far after lots of perserverence today:
Found different thread on how to do a factory reset
http://androidforums.com/samsung-galaxy-s2-international/512444-restoring-factory-without-usb-connectivity.html - thanks Russell.
When phone booted up again I was back to original problem of when sellect "Market" app it took me to the Google Play Store T&C web page. I then realised that this linked directly to the Google PlayStore internet web page (by tapping the Google Play Store banner). This listed all the available apps as you would see them on the internet. Tried to download of a free app from there and got the message along the lines of "Your Google account does not have any android devices registered".
Went on to my Google account and found out that to add an android device you need to set up the 2 step verification process which generated a 12 character (Applications Specific) password for me. This is different form the normal password associated with my google account.
Did factory reset again, and this time during set up, when I got to the Google account set up screen, I used the Application Specific 12 character password (not my Google Account Password).
With the phone set up I hit the "Market" apps button. It went to the T&C screen of the Google Play Store again! and while I was thinking "Oh No, You Bas....." the screen flickered then changed to the "Google Play Store" apps screen. Yee Ha.
I downloaded a couple of free apps no problem.
As this was the last techy thing I needed to get working, I'm now a very happy chappy and loving my new S2 although this bit was hard work.
Kies Air works great and it was a bonus to see I could import from itunes!
Sorry for the long post but this may help others.
Shotgun, thanks for the welcome to the forums and I may be here more to help after what i've just learned.