Thank you! that was the problem The SD card was full like 100% full!. I free-ed up some space and my favourites etc, are being saved. I tested restarting emulation station and re-booting the Pie. All working fine now.
I feel like a fool! Thank you for your help.
Not a complaint, but a request: it might be nice to get a big fat warning if settings cannot be saved due to no SD card space. But from now on I will make sure to leave some space on the SD card.