Nothing yet, spoke to O2 again today, and they thought it could have been because i was using a pay and go sim, and it could work with a contract sim instead, but you have just proved that wrong.
Ive also spoken to HTC tech boffins who sent me the following:

It appears that when you receive an MMS, the network tries to find out what handset you are using and scales the picture bigger or smaller so it can be displayed on your screen. As you are using an O2 SIM with a Orange branded phone, O2 cannot determine what handset you are using and so, to be safe, scales it to a small size so that you can see the entire picture. Therefore, if you were able to use an Orange SIM in the Orange phone, the image would display normal.

To check that your settings for the Internet are set up correctly, I have included the settings for O2 Pay As You Go.
Here are the settings you need for your device:

?WAP

Tap Start then Settings
Tap Connections, then Connections
Tap Advanced
Tap Select Networks
Tap the New... button under Programs that automatically connect to the internet should connect using
In the Enter a name for these settings field, enter O2 WAP
Tap on the Modem tab and then tap the New. button
In the Enter a name for the connection field, enter O2 WAP
In the Select a modem menu,? select Cellular line (GPRS) or Cellular line (GPRS, 3G)
Tap Next
In the Access Point Name field, enter payandgo.co.ukand then tap next
In the Username field, enter payandgo
In the Password field, enter password
Leave the Domain field empty.
Tap Finish
Tap the Proxy settings tab
Tick the This network connects to the internet box
Tick the This network uses a proxy server to connect to the internet box
Tap the Advanced button
Tap on HTTP
In the Server field, enter 193.113.200.195
In the Port field, enter 9201
Tap OK twice
In the Programs that automatically connect to the internet should connect using menu, select My ISP.
Tap OK


MMS

Tap Start then Settings
Tap Connections, then Connections
Tap Advanced
Tap Select Networks
Tap the New... button under Programs that automatically connect to the internet should connect using
In the Enter a name for these settings field, enter O2 MMS
Tap on the Modem tab and then tap the New. button
In the Enter a name for the connection field, enter O2 MMS
In the Select a modem menu,? select Cellular line (GPRS) or Cellular line (GPRS, 3G)
Tap Next
In the Access Point Name field, enter wap.o2.co.uk and then tap next
In the Username field, enter o2wap
In the Password field, enter password
Leave the Domain field empty.
Tap Finish
Tap the Proxy settings tab
Tick the This network connects to the internet box
Tick the This network uses a proxy server to connect to the internet box
Tap the Advanced button
Tap on HTTP
In the Server field, enter 193.113.200.195
In the Port field, enter 9201
Tap OK twice
In the Programs that automatically connect to the internet should connect using menu, select My ISP.
Tap OK
Tap Start
Tap Messaging
Tap Menu, Tools and then Options
Tap MMS
Tap the Servers tab
Tap the New button
In the Server name field, enter O2
In the Gateway field, enter 193.113.200.195
In the Port number field, enter 9201
In the Server Address field, enter http://mmsc.mms.o2.co.uk:8002/
In the Connect Via menu, select O2 MMS
Set the Sending size limitation to the maximum available. (this may incur extra charges with your network. Consult your network for charges for large MMS messages)
In the WAP Version menu, select 1.2
Tap OK Three times

Now im a complete noob, (apologies if im asking a stuoid question here) im asuming the the S710 and E650 roms must be different to the point of different menus????? as the mail they sent me and menus they quoted didnt tally with the menus i was looking at on my phone..........

Totally confused me, so if anyone can confirm this to me its something else to look at!

I was wrong, it doesnt send mms as normal, they are at a reduced rate as well. both are around 10% that of the actual file size???
Any ideas........

I rang O2 today, they said as far as they were concerned everything was running fine, the picture messages were coming thru so the settings were correct.
They told me to look at the setting on the phone. But as you say, there doesnt actually appear to be any settings to change.
More than likely O2 talking rubbish especially when they dont even support the phone!!!!

Help................!

Hi, thanks for these settings.......worked a treat for me!!

Im only having 1 small issue (not really to do with any of your settings but you may have come across it!), every time I get a new mms the pictures come in as a tiny thumbnail with a max size of 5kb, i'm able to send pictures out at the original resolution but i cannot see anything that controls the size of incoming picture???

Can you help or point me into the right direction at all (newbie you see!!)

Cheers.

Hi, did you ever fix this problem?? I'm having exactly the same issue.
All my received mms pictures come it at 5kb, but seems to send out fine.
I'm running an E650 on O2 payandgo

thanks for this, worked 1st time!!!!