Thanks for this link to the Knowledge Base. I had tried searching ACT website but obviously wasn't in the right place. I didn't solve the problem in the way recommended in the article, but it gave me an idea and since you list yourself as an ACT evangelist I thought you might be interested in the solution.
I tried dialing different contact and the error didn't reappear. When I was testing and trying to fix this I had been dialing only two contacts, the two I had entered most recently. I tried them again and voila the error reappeared. In trying to fix this I had created new databases, imported the old database, tried it again with different options. Problem is, after I did this I tested on the two records that were giving me problems, so the problem must have carried through the import process.
To solve I just went into these two records and deleted their phone numbers, saved the contact record, entered phone numbers again, saved and the dialer now works fine. Just after entering these records, I must have tried to dial these two records before saving. Not really a technical solution, but raises interesting thoughts about what is saved in the phone fields of these records to cause the error and the fact that it is carried through imports.
Jamie