After trying to solve this over several hours, I have finally managed to achieve recognition of my external disk "Steam directory" on both my PC and my laptop.
The reference to the "shortcut" for moving the directory was the route to the solution (thanks for the reference standalone), however, the "shortcut" reference as it's written up only seems to apply to moving the directory after install.
I can't find any mention of using the same "Steam Directory" on external hard disc for 2 different computers (i.e. PC desktop and Laptop, not in use at same time, I hasten to add).
Anyhow, the solution is to create a shortcut in both systems leading to the same "Steam directory" on the external disc.
In Windows XP go to:
C:\Documents & Settings\All Users\Application Data\Spectrasonics
and create the shortcut in that folder pointing to the "Steam Directory on your external disc.
The process was similar on Vista (my laptop OS) I believe (I don't have my laptop on at present to check)
I hope this info helps some other people out there.
Maybe I am just a dumbass and it was obvious all along...
