It seems that when i upgraded to django v1.0 it broke the captcha as all template variables are now auto-escaped, whereas previously escaping had to be done explicitly this meant that you would see the html, the field is now marked as safe and so fixed! 
This really does prove to me the value of testing as its been weeks since I upgraded, I never noticed because as a site admin I dont see it. Doh!
On a side note, i’m wondering what peoples opinion on captcha is? personally I see it as essential, and that re-captcha is the best, second only to googles own.