The issue with the filter not being applied to the report is a known Microsoft issue with certain set ups of Windows 7 and Access 2010. The hotfix found here: http://support.microsoft.com/kb/2596496 solved my problem.
I run Windows 7 64 bit and Office 2010 32 bit, when downloading the hotfix I selected the "x86" platform as that's the 32 bit. If you are using Office 2010 64 bit you should download the "x64" platform.
To find out your office version, open any office product, click File Tab, click Help and it will be on the right under "About Microsoft ".