problem solved see below.
The simple solution for me was to restore the whole system from Time Machine.
Here's how.
Make sure you copy all the stuff that you haven't backed up manually to a spare drive.
This fix will restore everything including 10.7.4 and wipe out all unbacked up data.
Hold command R down and reboot with your time machine drive connected.
You'll then have a few options to restore, so select time machine, find the file in the list that is prior to 10.7.5 (it shows this in the listing)
Hit restore and depending on how much data, there will be an estimated time displayed. In my case about 45 minutes.
Spotlight is now fine and re-indexing within Minutes
Time Machine is back to normal and does not Hang.
I hope this is of help to someone if you're in a fix and as frustrated as I was.
Problem now solved till Apple do a better update.
if you don't fancy the restore option above here's how to disable spolight.
Key in the following.
sudo mdutil -a -i off
You will be prompted to enter your admin password.
Hit return spotlight will stop.
If you want to enable it again, return to Terminal and type:
sudo mdutil -a -i on
You will be prompted to enter your admin password.
Hit return spotlight will start.