It turns out the above error has been affecting a few people after upgrading to SP1 of MOSS/WSS, it can be fixed by restarting a few of the SharePoint/WSS services (see below) however the problem does come back after a while which can be irritating if you need to see the logs for a specific period.
I cannot see anywhere that this bug/issue has been reported to Microsoft so I’ll probably register it on the connect site if I can, I will post back here with the link – if you have the same problem could you put a comment on the connect site too please then we can get this issue noticed at MS.
EDIT: I have raised the issue as feedback on the MS Connect site, see here – https://connect.microsoft.com/feedback/ViewFeedback.aspx?FeedbackID=408671&SiteID=428 please leave a comment if you have the same problem.
To fix the error and start the logging again, simply restart the ‘Windows SharePoint Services Tracing’ service. Once this has been restarted you will notice the logs start again!
Maybe I will write a script to detect when it stops logging and restart the service…ill keep you all posted!