WordPress.com Stats API Problem

I have uploaded the latest version of the wordpress.com stats plugin and then activated it. It then asks me the following:

The WordPress.com Stats Plugin is not working because it needs to be linked to a WordPress.com account.

Enter your WordPress.com API key to link this blog to your WordPress.com account. Be sure to use your own API key! Using any other key will lock you out of your stats. (Get your key here.)

I then enter the key (correctly as I have copied and pasted it) and it throws this at me:

The API key "key goes here" belongs to the WordPress.com account of "myusername". If this is not your account, please re-enter your API key.

Add new blog to my account
Do this if this blog is new or has never been associated with your API key. This blog will be added to your WordPress.com account.

So I click add new blog and then I get this error:

Error from last API Key attempt:
Missing API Key
The WordPress.com Stats Plugin is not working because it needs to be linked to a WordPress.com account.
Enter your WordPress.com API key to link this blog to your WordPress.com account. Be sure to use your own API key! Using any other key will lock you out of your stats. (Get your key here.)

If i re-enter the key I just go round in circles.

Anyone any ideas how to fix this issue? Thanks in advance.