Thanks for all your help...at least with your inputs it is an educational as well as frustrating experience.
The HC reading was at Fast idle ( I should add that in the first fast idle test the HC reading was 88...after failing the first fast idle on CO and Lambda the tester has to do a second reading having pre-conditioned the car i.e run it at fast revs for 3 mins). The basic idle test result did not refer to the HC levels.
Some additional queries.
(1) Is it possible that the lambda reading at the sensor is different from that at the tail pipe? That is, the data being provided to the engine manmagement system may not be that found at the tail pipe. I am wondering whether the Cat could be having a differential effect on the gases. I suppose a gas probe at the Lambda sensor location would be revealing.
(2) How easy is it to detect an exhaust leak. The whole system looks fine to me so if there was a leak it would be at either the manifold joint, manifold- to- CAT joint or CAT- to- tail pipe joint. There are no obvious signs but I am relying on uncalibrated eyes and ears. Could a small leak have such an impact. If so how would the professionals detect it?
(3) How good is the OBD and the MB diagnostic. Should I feel confident that my money spent on the MB diagnostic will definitely identify the problem or confidently exclude many factors.
(4) Should I hire an exhaust gas analyser and experiment with 'solutions'?
Any responses to these queries would be appreciated.