Apple support called me back to say that Three had an issue which they were fixing with Apple.
Not sure how accurate that is because I have tried Orange and Vodafone sims in new iPad and my iPhone 4S.
On iPad not personal Hotspot but all give Personal Hotspot when in iPhone so I can only conclude it is an iPad issue and not the carriers.
I am beginning to think that apple only enabled hotspot on 4G and not 3G so it would make sense that an iOS update is needed to fix it.
basically I don't think they know what the problem is....