For anyone else reading this, Roy's 'Solved' comment above is correct.
I have gone into Xcode after the update and it had automatically updated my Base SDK to the latest 'iOS 7.0'.
After changing this back to 'iOS 6.1' - both the Simulator and Device are now working the same, as expected on iOS 7.
Not trying to steal Roy's thunder (whose saved me a good numbers of hours - thank you), just summarizing to others how to quickly fix the issue.
Ralph