OK, just to wrap this long thread I managed to get it working but only after having done many changes to the configuration.
It would be logical if the changes applied to a HTML module Editor's settings were visible without having to resort to changing the pan-portal settings.
Treat the threat as closed though.
- Host --> HTML Editor Manager --> Editor area CSS - set my css file for the whole site
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Only when I removed the Editor area CSS reference to my css file on my dev website page in the HTML Editor Manager for particular module did the settings change and the background was set to grey.
It would be logical if the changes applied to a HTML module Editor's settings were visible without having to resort to changing the pan-portal settings.
Treat the threat as closed though.