Yes its possible i flicked some switch..
but interestingly, if I set Windows Internet Explorer v7 as the default Browser, I can not communicate to the Itouch Stanza or use Calibre to test server. All I get with Calibre is a web page with Calibre Logo at the top and the search buttons on the right side. As soon as I set Firefox as Default Browser everything works as it should. I can test server and see all my books and Stanza works perfect. Hence my reasoning that the Browser was somehow involved.....