Well I was beginning to think that I would never solve this problem until a kind gentleman contacted me and pointed me towards the Jaguar Phone Harness. He said that it was a common problem on the early Jags i.e. XJ6/J40. He told me it would most likely be a shortage on the phone harness and gave me a lot of detailed info to enable me to try and trace it. In the end I decided to disconnect the phone system entirely and Hey Presto, the radio came back on without the Tel Mute showing. everything returned to normal. Ok, I no longer have the use of the integral phone but at least I can continue playing the radio, tapes and CD's. Wonderful. I will purchase a bluetooth that links to the radio signal so I can receive calls through my smart phone whilst driving, the same as I have in my XK8.
Anyone else that may encounter this problem on the older XJ's, check out your phone harness first.
Thanks to all those who responded with information.
Regards
Roy