Thanks for the replies. To answer some of your questions, air pressure, thinning, mixing etc are all correct. I have a large'ish' compressor with tank and regulator, my old airbrush sprays just fine.
What Abarne descibes is what is happening, 'air stream and atomised paint is steady but occasionally you get a spatter onto the model. I have persisted with it and have kind of solved it. I needed to slightly loosen the tip to get consistent spray and I have to keep cleaning the tip as Abarne mentions, because paint builds up on the tip. I think this is where the spatter comes from.
Still I am not very happy with it, I have to constantly wipe the tip to prevent this. Also if you stop painting for a few seconds, you need to spray into the air to blow the build up from the nozzle or else it goes on the model. I wouldnt recommend this airbrush to anyone. I will stick with it a little longer, not by choice but because I wasted so much money on it and I havent the spare cash to buy a replacement right now.
BTW sending the thing back to testors probably isn't practical as I am in Australia.