Thks for the info robtillaart, I think that I have bitten off a little more than I can chew 
You are probably right Gordon a line or wall following robot probably would of been more sensible but I'm not good at sensible =(
I'm not good at quitting either, so I'm going to try and continue as far as I can (probably not very far), whilst starting another project in paralelle.
This is the code I have so far:
// Wheel encoder/LED/Motor
#define LED 13 //pin for LED
#define ECOD 7 //pin for encoder pulse
int transistorPin = 11; // sends current to transistor/motor
int val = 0; // store state of encoder
void setup(){
pinMode(LED, OUTPUT); //led is output
pinMode(transistorPin, OUTPUT); // motor is output
pinMode(ECOD, INPUT); //encoder is input
}
void loop()
{
val = digitalRead(ECOD); //read value of encoder and store it
if (val == HIGH)
{
digitalWrite(LED, HIGH); // turn led on during pulse
digitalWrite(transistorPin, HIGH); //turn Motor on during pulse
} else {
digitalWrite(LED, LOW); // turn led off when pulse stops
digitalWrite(transistorPin, LOW); // turn motor off when pulse stops
}
}
So at the moment when I turn the encoder it turns the motor and Led on and off (at least if I move it very slowely).
Now I need to get it to count the pulses and turn off after a predifined number?
I did a nice little schematic to show the wiring but with no web space I don't seem to be able to post it =( If anyone where interested I'll e-mail it.
Thanks again for your interest.