Hi Guys,
I've had this issue for quite some time and I've found out whats causing it! GRRRRRR
I stumbled across the cause by going to Design -> positions -> Main Menu -> Edit
I noticed that a warning appeared saying Top Horizontal Menu cannot be used with Main Menu - voila! Its a module that's installed but not showing - I deleted the folder under the Modules section but I suppose a safer option would be to install it from Module Manager and Uninstall it again - I suspect at some point its been installed and during the uninstall i've told it to leave the folder there.
Just a quick note I forgot to add....
I viewed the source of the module and it has a section which automatically disables the ps_main_menu module.