Thanks again for the help. I ordered 10.6 from the telephone apple store. The lady said this is very common since the iPhone 5 came out and that you can only buy 10.6 over the phone now for £14, not online or instore. She said lots of people are buying it elsewhere for up to £80 to get their phones working.
She confirmed that my machine won't run 10.7+.
All ordered, should arrive in a few weeks (very high demand for it at the moment!)
Cheers again.
Same thing happened to me when I picked up the 4, I needed to update to SL from Tiger with the added fun of having a broken Superdrive so couldn't actually install the OS update. I finally just took it into Apple and they did an install over USB, but yeah, was pretty annoying *just* so I could use the phone with my computer. Regardless, you appear to be ok.