Nope still not working. First I created a new image (new name) as well which failed the same way, the permissions on the folder of the image were set to root as owner. So I uploaded the same new image to an existing Fog image and during the upload it reset the permissions on that folder to root as owner, and the same problem again while downloading the image to a different host.
And no still no sign of this fabled d1p1.img.001 file.
Update - Yeah using a new workstation and creating a new image from scratch seems to have fixed it. Thanks