So with a little nudge from Eric5h5 it would appear there are two different 'character customisation' demos on the Unity website. One for Unity 3.0 and an older one for 2.6. Doesn't help that both pages look exactly the same (apart from one ambigious element - see below), though thankfully the actual filenames of the projects are different.
Version 3.0 45mb - CharacterCustomization
Version 2.6 65mb - Characterdemo
Doing a Google search for the demo, led me to the Unity 3.0 version, though nowhere on the page did it say it was for 3.0! There is some actual text to the side that says 'Unity 2 Resources' which actually led me to believe it was a version 2.0 demo. In actual fact the text is really a button that takes you to the old Unity 2 resource page.
Its been frustrating to lose 1.5 hrs over this, especially since Unity 2.6 incorrectly identified the project as being created in an 'older' version of Unity, where in fact it appears to be version 3.0! Had the warning message correctly stated it was 'too new' I could have saved myself all that time!
Still at least I learned that var is acceptable in C# from Eric ;)