OK, its Sorted!! Figured out thanks to the hint from Mirez that the Bonnet open switch is faulty. See the attached screen shot from VAG-Com, I have labeled up each "Cell" in group 2 and 15, these contain the Open or Closed states for Doors, Bonnet and Boot. The Bonnet switch was fixed in a state of "Open" meaning the alarm was constantly sounding and the indicators would not flash when armed. I removed the switch completely leaving the wires loose, this has made the controler think the bonnet is closed, allowing the indicators to flash and the alarm to work correctly! Will now get a replacement switch. Thanks for all the advice guys.