It took far too long to get this working but after many googles I found what I needed.

If you are using Server Side Includes on your webpages and they dont work when running locally on your XP machine (localhost) then you may find there are some mappings missing from the IIS configuration.

Open IIS
Right Click on the website name and select properties
click "Home Directory"
click "Configuration"
click "Add"
For "Executable" enter the path to your ssinc.dll file.
On my machine it was at C:\WINDOWS\System32\inetsrv\ssinc.dll
For "Extension" enter ".htm" (you need to repeat this for every extension where you may use SSI's)
For "Verbs" select "Limit to:" and enter "GET,POST"
Check "Script engine"
Click OK, Apply, OK, OK

Thats it although you may need to restart IIS