I have discovered the cause of the problem. We have the blade I/O expansion units attached and so have 4 nics.
on 3.02 the build was set to use ksdevice=eth0, however now in 3.5 we have to specify this as eth2 ??,It's the same physical NIC, just enumerated differently now during bootup. Once I'ts built the vmnics are bound to the correct interfaces.