I have connected everything up as per the instructions in the A2 manual and also the iOSD manual along with the AVL58 transmitter on the ribbon cable, but the first iOSD got very hot and stopped working. This was second hand so i suspected that it was faulty so i brought a brand new one only to get the same problem?

The power LED does not light up and the USB no linger works.

Check your power wiring. Sounds like you have a short somewhere and I suspect it's where you are getting power to your camera. I'm using the iOSD and A2 with no issues together.
Can you post a wiring diagram of how you have everything connected?

Exactly as per the installation manual

I have now had 3 different IOSD MK II modules since November.

All operated normally heat-wise with the overlay coming back down through the Lightbridge and displaying normally on the ground screen, all exported FLY???.dat files through the USB.

The reason I've been swapping them out is because firmware version 3.4 caused the Dataviewer to stop working. The first unit the dealer replaced because he couldn't figure out why the Dataviewer quit, the second was before I knew the upgrade caused the problem, so I upgraded it, too. The 3rd I purchased so that I have one IOSD without the firmware upgrade.

You're problem almost sounds like someone is drawing power through the IOSD.

If you're reading about 24 volts on the power leads to the IOSD, maybe you could try not hooking up anything but the power leads, turning the beast on, and let it sit there for a while to see if it gets hot.

If it doesn't, turn everything off, hook up one other connection, and repeat until it starts to get hot, then check the power input to THAT unit.

Thanks HM, ill give that a try when the replacment iOSD turns up