speedy i think your my hero! 
I found the problem here - once you have run the ktpass on the DC and set the password you then CANNOT log onto the domain as that account with the password you supplied in the ktpass command!
running:
c:\kinit -k -t xmpp.keytab xmpp/jabber.mydomain.com@MYDOMAIN.COM
works and provides the output:
New ticket is stored in c:\users\fred\krb5cc_fred
BUT if you run:
c:\kinit xmpp/jabber.mydomain.com@MYDOMAIN.COM
{input password you set with ktpass command earlier}
you get the error:
Exception: krb_error 0 Checksum failed No error
KrbException: Checksum failed...etc...
That originally made me think ok i'll reset the password for the user account in AD (as i read that in another post). So i reset it back (to the password a choose for the ktpass command) and re-ran the above kinit command. The command now works! The trouble is by resetting the user account password AFTER you have run the ktpass command breaks the openfire authentication!! you then have to re-run the ktpass on the DC and copy back to the openfire server.
my test client is logging on like a charm - i'll try this at work tomorrow to confirm all is now working as expected and report back.... for those still struggling - don't give up hope!