OK Here is the solution which I found when I was looking for the default.properies file of the referencing project (not the library) in my file system. Although the referencing project was in the same eclipse workspace as the library project, the actual files were somewhere else in the file system ie they were'nt in the same parent folder of the library project. As soon as I placed the referencing project in the same physical folder as the library project it all went fine.
I guess that this must be something to do with android using ant underneath the covers.
Edit: The project name needs match the folder name on the file system. What you are seeing in the Project Properties->Android->Library Reference is a relative file system path.
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