Hi Jimp,
I tried that, it did reduce the errors but they were still there. As a last ditch attempt I stuck in a 160gb SATA disk i had laying around and that worked perfectly. So it must have been something strange with the converter.
Strange thing is, I have the exact same setup on my primary firewall, with a 4GB CF card and converter, upgraded that to 1.2.3 and worked without any problems. So I am not sure why I had issues with the backup firewall, it would be a very strange coincidence if there was a hardware failure at the same time as upgrading the software.
Either way things are back up and running, thanks for your help, much appreciated.