I'm more than happy to provide as much detail as I can, if it helps to get a resolution to the problem.
Yes I created a new login on the named instance. The server principal that I created has since been deleted, along with the database principal and database schema that was also created for this user. The result was the same upon trying to create a new table.
I've also created a copy of the problem user in AD and assigned them to the same Windows Groups. This copy has no problems creating tables. Taking all this into account it appears to lead to the problem being with the specific domain\user3 in the specific named instance only.
Knowing where to look next to try find where the problem lies is the difficult part :hehe: