Running a 1/8 chain on 3/32 sprocket & chainring?

Cheers for that small furry, i'm assuming i'd be using the spacer on one side of the rear hub to move the sprocket position outwards but then my rear wheel will need re-dishing yes?

No. The spoke holes will not be moved relative the hubnuts (we are talking about a track hub?) so no need to re-dish.

Also are we assuming that i'm mounting the chainring on the inside of the crankarm?

I'm assuming you mount the chainring in the way it was intended by the crankset design.

Velo Libre - with reference to mounting my chainring on the inside of the crankarm is there any reason i cannot use spacers (i.e. washers) to move the chainring in even further? Providing i have sufficient clearance with my chainstays of course. This way i don't have to touch the rear wheel at all...

This is also an option, but in my opinion its ugly.
http://www.sjscycles.co.uk/product.asp?pf_id=5888&src=froogle