I then decided to persevere with Microsoft and am glad I did. Firstly they repaired the console for free as it was still in warranty ;-) and secondly they dealt with all the shipping too.
About a week after I sent it, it came back with a complete new motherboard. Touch wood, its been fine since.
Oh, and guitar hero still rocks!! I'm now pretty sure it must just have been coincidence. My game and guitar controller have been used a lot now and on 3 different consoles and mine was the only one with a problem.