Hello Sasha
Thank you for your reply. The requirement to restart CCS after setting the environment variable is definitely correct although this was not the cause of the my problem since the error message included the correctly set value for XDCTOOLS_JAVA_HOME. However I do notice a difference in your set up and how I had my system configured. On my computer the environment variable was already set to the operating system Java installation under the "C:\Program Files" folder (possible by the earlier install of CCS v5.4, I am not really sure) so I just left it there. On the other hand you are using the version of Java installed as part of Eclipse under the CCS install. I doubt if the actual Java version is the problem but I suspect that the space in the path "C:\Program Files\Java\jre" is causing the problem. I have noticed that a lot of open source tools, particularly those targetting Linux as well as Windows, do not really support spaces in file and path names properly.
As for the version of CCS I will stay with 5.5 until after I have completed my current project. I can't have problems with the tools delaying things any further.
Thanks
Phil