HTML email problems: text is fine

Simple form built with FB. After applying UE, Plain text email is arriving just fine. I am having issues with HTML.
I saved the Plain Text producing php file and saved as a new file and made the following changes for HTML
1) Removed code in plain text preview
2) Clicked to HTML Preview and followed instructions exactly as per "Solution Recipes" - "Creating an HTML email"
3) To test I simply took 2 fields (first name and last name and bound the PHP relevant values from "Bindings"
4) Email arrives but with EVERY field (as per the plain text message) and with no apparent formatting (actually there is no real HTML - just a table with "First Name" and "Last Name" and a column with the binding.) I would have expected to see just those 2 fields and their values..
IT looks like the HTML file is not being generated..
Not sure what is going on, however.
1) When I go back into the Universal Mail Server Behavior / Body tab the "{dynamic value}" phrases are not visible - I have to enter it again but once I save and close the file it disappears (just blank spaces when viewed)
2) The webassist code generation progress box is no longer visible - I cannot see how to get it back.
3) I have closed and open DW
4) I have attached some of the latest files but you may need others..


Thanks