ok, found a typo in my conf, I had “play_mp3_cmdline” instead of wav - so make sure it looks like this in the mycroft.conf file :-
// Mechanism used to play WAV audio files
// Override: SYSTEM
//“play_wav_cmdline”: “paplay %1 --stream-name=mycroft-voice”,
“play_wav_cmdline”: “aplay -Dhw:0,0 %1”,
Then both Mic & output work (speakers from 3.5mm jack, Kinect Mic).
However mic input seems to freeze after a few mins ?
All working fine now, fresh Ubuntu 16.04 install, Kinect or USB headset working for Mycroft (run in GUI console !), libfreenect & servo controls all working, Kinect depth & video work too