Thanks for your help. I tried that a fair few times and didn't seem to make any difference. I put back to stock and got it replaced by Telstra today.
My New handset is working fine at the moment, on Telstra Stock OTA ICS. I will root and update to your kernel again. I suspect it was always faulty. when I spoke to my brother I can not be certain I was not on speaker phone (the only call really made on the less than 12 hour old handset).
Your Kernels have not caused issues like this before that I am aware, so I think it was definitely a hardware issue. I will report back after the update so we can confirm.
BTW I dont need to flash a ROM after flashing your Kernel do I? I am pretty sure I dont but just wanting to check lol