OK, so after much time spent on phone and almost getting scammed by iYogi - I finally had fantastic help from Apple Support. Thanks Dion.
There seems to be a problem where Disk Indexing is disabled, this cannot be enabled aparently. So I have tried re-installing a clean system - didn't work. Erase HD volume and re-install system and migrate everything from Time Machine, didn't work. Erase HD re-install system and check spotlight on new system before migrating from Time Machine - all works fine - migrate only application and documents - Spotlight failed again!
Clearly there is a bad file somewhere in my documents which is killing disk indexing - I have upon advise cleared off all disk repair, clean-up software - MacKeeper, CCleaner,TechTools, TuneUp, Rapport, and removed all their pref files and LaunchAgents.
Next job is erase HD, re-install OSX and set up a completely clean new system. Then I'm going to use Time Machine to recover Mail, and Applications only. Bacically start again...wish me luck...
Basically, I reckon problems like this, and slow running are caused by migrating from old to new machines, you are carrying over all the dodgy stuff which blighted you on your old machine, never giving yourself a chance to use a brand new un-corrupted system, is perhaps a mistake.