Sadly none of the above has worked.

I've done a little more research and the only thing I can think of it that the Airport is incompatible with the authentication used by Sky. I did speak to sky but they couldn't tell me if they used PAP or CHAP.
I found these posts on the apple forum:
https://discussions.apple.com/message/9815295#9815295
https://discussions.apple.com/message/11308244#11308244
These people have had the same symptoms as me and it looks as though it is because the Airport doesn't support CHAP authentication - can anyone confirm this?

When I had sky I had to put the 120 in half bridged mode (allow pppoe over pppoa) and also had to mimic the mac addresses with my original sky router, only then would it connect.

Hi cheops2006
I have investigated this and it turns out that the settings for customers who have come over from O2 are completely different to those for people who joined Sky. It looks like I'm going to have to put a CHAP compatible router between the Vigor 120 and the Airport.

Users with the vigor 120 v2 & sky MER... there is a new firmware supporting MER and has security fix issues
DrayTek has not forget us (at the moment is at main Taiwan)