Inspired by Rob''s progress, I have managed to get a very well calibrated digital compass working after a few hours work. The process of calibration to offset the effects of adjacent metalwork is quite interesting, I learned a lot from that exercise.
However, it is upset by tilting it so have invested a massive £12 on a 10 degrees of freedom sensor which gives a 3-axis accelerometer, 3-axis gyro and 3-axis magnetometer together with a barometer. With this and by exercising my maths a little (aided by the wealth of existing libraries on the internet) I think I can develop a little DI style compass that works in almost any attitude.
This is a very interesting diversion whilst it's so cold in the shed!