This issue was well beyond sp_lock. It's 32 bit and on it's own box ( not a VM). As i understand it-SQL server takes 80% of server resource which is what is happening in this case- split equally between 2 instances. It turns out only one instance was failing.

I'm not new to SQL server- have monitored locks and performance tuned queries extensively but this was different- more like there weren't locks - just flags/ errors saying there was. I quessed a system table was corrupt in someway- quite a leap I know, but after this fix it appears to have solved our situation..........at least untill we move onto two new box's with higher spec which are on order.

It seems a strange solution I know but if i helps anyone else -great!