Firstly - apologies - you guys are probably sick of this thread...
Bench tested the new starter - both solenoid is throwing and the starter is spinning fine - it's just not engaging.
Spoke to the guy I bought it from - he suggested that the ring gear could be positioned wrongly - can it be reversed and that would mean the pinion gear can't throw far enough? Might explain why only the very end of old starter pinion gear was munched. And how could I tell if that's the case?
Finally - measuring the distance from connecting plate to maximum throw, the new one looks to be about 4mm shorter - problem there as well?!