Well, I have my Kindle 3 in my hands at last, I have tried all the methods I know to remove the margins but to no avail, any hints/tips would be greatfully received...

This is using non DRM Epub to Mobi with the margins set to 0 in calibre

Same thing here. The Kindle doesn't seem to observe the margin configuration I setup in Calibre. I think the Kindle has "minimum" margins hardcoded in the firmware that cannot be overruled by the css stylesheet of the ebook.
Has anyone been able to reduce the page margins?

I've tried but to no avail. Unfortunately the Kindle support of CSS is rather limited and does not support the use of margin-left or margin-right or padding-left or padding-right.

On my Kindle 2, you can edit the default left/right margins. You don't even need to install any packages or jailbreak! I don't know if this will work for Kindle 3 or not, as I don't have one. But for earlier versions, hook the Kindle up to your computer and open the following file with your favorite text editor (e.g. notepad):You will see a line like the following:
The default is 40 pixels. Change it as you desire; 0 does work if that is what you want. Once you have changed it, save the file, eject your Kindle, and restart it using the menu (Menu > Settings, Menu > Restart). Your margins should now have changed.

It's still there on the K3. Haven't tried though. (But I do remember seeing 40 as the default. I may be wrong ^^)

The file is still there, and the default is 40.

I changed it to 20, and this worked - the margins were reduced.
However, if you select the dialog to change font size etc., this resets the margin - so you'd have to edit the file again to change it back.

In other words, this sets the current margin, not the default margin.

I've had much success using Sigil to open the CSS of the non-DRM ePub, and editing the Left and Right margins from 5pt to 0, worked like a charm for all my non-DRM ePubs!

Let me know if it works for you too!

No, as stated just above you cannot change the CSS margins in Mobi (Kindle) books.

Yup, my method only works for ePub books, but once you've made the changes to the ePub book, you can then use Calibre to convert them to Mobi, and they should display perfectly on the Kindle without the left and right margins

I tried it too, but it didn't take. The only result I got was a screwed up Collection sorting. I had been using an initial period to make Collections appear first during Title sort. I guess the restart caused them to be re-alphabetized differently so I had to rename all collections to an initial underbar instead. Damn Amazon for not allowing us to set this as desired.

K3 can eliminate margins totally
 

Yes, the Kindle LG WiFi 3 can eliminate all margins using the Text key. I have one eBook set that way and another not set that way. One uses the 5 way controller to set the number of words per line.

I only use AZW - Amazon - books however.

You would think it would but, sadly, this is not the case. This is the exact method I have been trying to no avail.

I tried this but it does not take, when I check the file after a restart it has reverted back to 40

Just to confirm, you are opening up the ePub book in Sigil, and changing the "stylesheet.ss" file under the "Styles" folder? The values to be changed are "margin-left" and "margin-right", which were set to 5pt in my ePub books for some reason, so I changed them both to 0 and it worked.

Yes, this is exactly what I have been doing for months and it works fine on my Sony Pocket as an epub, when converted to Mobi it ignores this setting...