Hi All,
First thanks to everyone, it seems many heads are better than one and in the end i got it sorted.

Firstly, looking at the 4550 datasheet it seems that all the capacitor does is go to ground so in my wisdom i though nahh, dont need it, i guess i was wrong and should have listened to people

Second, i could never figure out capacitor values but i found some on an old redundant soundcard, the value is marked as 331, this capacitor is now in place and the circuit is working fine, i have tried Microchips mouse demo and it worked ok without the need for drivers on the pc, infact it worked better than expected when i plugged it into the bosses iMac at work and laughed at him trying to figure out what was wrong with his mouse for half an hour.
So anyway 331 works for me on 18F4550 @ 20mhz

Shaun