Yay! Found solution!
Was about to get the handset replaced when I found a way of repairing this myself.. seems its simply a software fault which should get fixed in the next firmware update, until this happens this is how you fix it:
first enable installation of non market place apps by going into settings > applications > and then ticking Unknown Sources
then.. open your web browser on your phone and type in the following:
http://code.google.com/p/toggleheadset/ you will then see a link to download the ToggleHeadset widget
once downloaded and installed add a new widget to your home screen, select Android Widget and then select Headet Toggle Widget
you will then have a button on your home screen to turn the headset on and off
This has now fixed the headset not working for me.. I imagine it will work for everyone else
