[eluser]WavyDavy[/eluser]
The problem wasnt with directory setup after all
It seems the problem was with the texteditor I was using, PsPad was showing the files as being saved in the project directory when in fact they werent.
I tried opening the project folder again using Dreamweaver CS4 and rebuilt the above files from scratch and it worked.
I guess I will have to download Aptana and use that instead, pity there is no free textmate for windows.