Thought I would let everyone who has been following this that I solved the problem outlined in my original post.
To fix the problem I change the VPN settings to allocated an IP address within a specific range (via the vpn wizard on the server machine). This way the client machine registers on the network fine.
My gut tells me that there has been some kind of IP conflict or something when I had the default settings ticked (i.e. DHCP sorts the IP allocating out).
Only problem with this I can forsee, is make sure that whatever range you specify on the Windows 7 server machine does not conflict with anything you have set up in your DHCP server (which in my case is running on my router).
But all is good.