Strangely it did turn out to be the Audio options in RetroPie itself. I say strangely because I never had to change anything when I first built the PiCade with the 8inch screen because everything just worked and it was the first thing I tried when I upgraded the screen. That it refused to work then AND refused to work when I upgraded to RetroPie 3.1 made me believe that it wasn't that simple. Oddly after I left it for an hour or so, I came back, tried again and it worked straight away.
But thanks to all who replied anyway.
Just one odd question.....
Does the 12.1 inch screen come with a protective peel off plastic cover? Reason I ask is that when it's running the picture does look slightly dark (certainly darker than the 8inch). I've looked at it and to me it does kind of look like there's a peel off but I'm really not sure and I don't want to break anything.