OK Show Emoticons was already enabled in Tools. I unchecked the formatting box for the custom contact names but to no avail. I re-activated view-by-name and this solved the problem, but now I've lost my custom names
Dunno if its worth not knowing who is who just to see a few pictures.
Just thought of something. I had view-by-email (custom names) on before but saw myown nick smiley in the conversation.
I just talked to me mate and he says hes on view-by-name so that would account for him seeing them.