I found a solution
in the autohotkey documentation 
not long after posting the above, despite having grappled with it for absolutely ages before hand. Typical! I got a script working on my main PC, but I'll doubtless have to slow it down a hell of a lot for my Arcade Cab PC.
If anyone else wishes to "Hide" a window whilst auto hotkey sends mouse and keystrokes to it, here's an example script that opens notepad in a semi transparent window. As far as I know this will only work with xp though.
#Persistent ; keeps script running until exit app is encountered
Process, Priority, , High ; makes the script run at high priority
SetWinDelay, 7 ; sets speed for script to run at - even minus figures are allowed
Run, C:\WINDOWS\Notepad.exe ; opens notepad
WinWait, Untitled - Notepad ; waits for the notepad window to appear
IfWinExist, Untitled - Notepad
WinSet, Transparent, 150 ; sets transparency level of the window if it exists
KeyWait, F3, D ; waits for the f3 key to be pressed down before executing the following lines
SendEvent {LAlt Down}
SendEvent {F4 Down} ; holds down alt & f4 to close the last opened window
SendEvent {LAlt Up}
SendEvent {F4 Up} ; releases alt & f4
ExitApp ; this terminates the script
Note that setting transparency to zero will prevent keystrokes being sent to a window, as the window can't be 'found'. Setting it to 1 will make it invisible to the human eye but good enough for the system to see. You can enter any figure between 0 & 255 - play around and see!
The other cool things I found that I never knew before were these:
Process, Priority, , High
(To make the script run at high priority)
SetWinDelay, -10
(To set the speed the script executes at. The lower the faster!)
This now only leaves me one problem in the shape of Outrun 2006 Coast to coast ...... but that should probably go in a different topic.