I spoke to soon Neo...when I looked in my localhost directory it had recopied the KFM folders I deleted...so deleted them again...but this time when I click on the BROWSE icon the popup window doesn't display the interface...however on investigating the URL it was using it was displaying this:
browse.php?type=images&CKEditor=optionala&CKEditorFuncNum=107&langCode=en-gb
so if I copied this URL into another browser instance and then added localhost/mywebsitefolder/webassist/ckeditor/ ..then the rest of the above URL then it works... so I wonder why its using the wrong URL and not my project one....