OK, think its been sorted...
I ended up changing the ownership to squid...
chown -R squid.squid swap.state
and that seemed to fix it.
checked logs, and squid seems happy, re-enabled the cache and internet works. tried going to the same page and saw that TCP HITS were happening.
Not sure of the cause... but happy its up and running again.
Thank you all for all your help.
I appreciate it.