Well I havent had much success here, I am obviously making a fundamental mistake.

Here is what I have done, I would be very gratefull if anyone can help me sort out what I am doing wrong.

Objective is to take a scenes standard lighting and change it to IBL using an HDRI image generated from within the scene itself.

First thing I did was to open a pre-set scene (Dream Islands) and insert three spheres with variouse textures, I then rendered this out and saved the results.

I then inserted a spherical camera in the scene, positioned it a little above the terrain and rendered the image. I then created an HDRI image from this render using HDRShop.

The next thing I did was to change the scen effect Atmosphere from Realistic Sky to None
Select the Scene Background as HDRI and loaded the image I created in HDRShop. I then turned off Light 1 so it wouldnt interfere with the IBL.

The attached image is the resulting render, as you can see the sky is messed up showing what looks like large chunks of the hdri image, and the lighting is a lot softer than the original image.

Thanks again.