So I made a sausage butty and a brew and came back to the problem at hand. After doing some more debugging I was at a loss, I tried testing the Instanced version against the normal rendering with some other CPU work involved i.e. my third year project. Doing this I found that the AI Demonstration didn't drop the frame rate at all whilst instancing but did significantly in the naive rendering approach.
And finally after nearly writing it off as a failure I though to check the .x file of the model I was using. To my surprise the "simple" sphere model I was using had 1600 polygons. Why?? Anyway I changed it to a 16 polygon diamond I had created in MAX and the results were amazing. Below is an image of the Instanced Diamonds; All 70,000 of them, and there is still 100 FPS with my Project running in the background.