Ben, thanks you very much for all your help.
I will put a proper explanation here in laymans terms, incase there are any other newbies that want to attempt a similar.
Objective: To replace an old mechanical thermostat with a new digital one. Additionally (but not important) the new stat has a wireless controller.
Important point to note: This is just to replace the thermostat, and NOT any programmable functions, as a different solution/wiring will be required for this.
The solution: The whole thing is just a switch!
1.) Power Off!! (This is important) Your old stat is likely to have 240v going into it (a point I almost did not consider), pretty much like a light switch, so do this before investigating further.
2.) The old thermostat. Wiring inside here is likely to be confusing when viewed on its own, as it may not be clear which wires are coming in from the wiring centre (the wiring panel inside your airing cupboard, or wherever the boiler/central heating controller is), or which wires are just internal to the thermostat itself. A better bet is to look inside the wiring centre itself first so you can see exactly how many wires are connected to the stat. (this is not nearly as scary as it sounds)
3.) The wiring centre.
With the power off, opening this up should be quite straight foward, and chances are this would have be updated from when the system was first installed (In my case a british gas engineer had replaced this a few years ago when fitting a new programmer). In any case you should see a wiring diagram inside the lid, which shows how the wires are laid out. The area of interest to you will be anything that points to the terminals where the wire going to your existing stat is located
You can see a picture of my wiring centre below, which showed my that terminal 2 & 3 were connected to my stat, and that a 3 wire (green & yellow) coming in from the stat, was left unconnected in my wiring centre).
http://picasaweb.google.co.uk/rmcdonald.lon/Thermo?authkey=FdcgfgP6Qs0#5269232675575098850
4.) Does your new stat need power?
If not (i believe there are a few model available which are completely battery operated), only two wires are needed then all you need to do is connect the live or common live as believe it is called, to the common live in your new stat, and connect the returning live wire in your stat, or the switched live as I believe it s called, to the returning live input in the wiring centre, basically this is the live that will being going back to the item to be controlled.And that's it.
If your stat does need its own power (as was the case for me) in addition to the live it will be switching on and off, then a cable with 3 wires are needed.
The problem for me was that the was no neutral coming into the original stat. To a newbie like me, "bringing a neutral" to the stat sounded like a big task, but it was very simple and straightfoward, and did not require running any extra cable.
Here is what I did.
The existing cable that ran between the Wiring C and the stat had 3 cores, (Brown,Blue & green/yellow).
Only the brown & blue were connected.
I connected the green & yellow to a neutral terminal in the wiring centre
I connected the brown wire (common live in the Wiring centre) to the Live terminal in the new stat. Now the stat has power.
I looped the live terminal in the new stat, to the common live terminal in the new stat (LX). Now the new stat has an incoming common live which it can switch.
I connected the switched live terminal in the new stat (L1) using the blue wire, back to the returing live in the wiring centre. I believe this is referred to as CALL and other names, but basically this is the live that will be connected to the device you want to control.
I did have a question as to whether it was ok to use the switched live coming in from the wiring centre, as the main live for the new stat, or did I need to locate a permanent live in the wiring centre.
The answer is it is fine to use the switched live, as in my situation, that live will be on when the programmer for the central heating is set to be on. Logically, the thermostat need only be doing its job when the timer for the CH is actually on. This way I did not need to run any new wires, and was able to use the existing 3 wire cable.
A point to note about your new mains powered stat. My one (siemens rdh10), does not need any setup if it loses power, so a switched live as the main live is no problem. If your device needs to be setup if it loses power, then a permanent live may be necessary for you, so that your stat has power even when the programmer has switched your CH off.
I know this is a bit of a long explanation, but it is aimed at the newbie, that needs a step by step.
Here is the short version:
Replacing the old mechanical stat, for a new digital stat - > YES it is possible and is quite simple.
1.) If your stat is battery powered, then just connect the common live that is in your existing stat, to your new stat, and your switched live, to the switched live in your new stat. There should be no need to disturb your wiring centre.
2.) If your stat requires power, then connect the common live (incoming live), to the live terminal in your new stat. Find the neutral terminal in your wiring centre (very straightforward), and connect this to the neutral in your new stat. Connect the switched live terminal in your new stat back to the wiring centre.
Job done.
Many thanks to hairyben