No, Kernel parameter doesn't force the runlevel. This seems strange to me, I have checked my inittab file against another Red Hat 9 installation I have at work which doesn't have X installed they are identical.
STOP in true Newbie fashion I have just realised what I have done. The PuTTY screens are confusing me. On my gateway machine the inittab reads:
I must of been looking at the wrong file. At least now I know why its booting in Graphical mode and everything makes sense again.
Thanks very much for sticking with me!