Thanks - that makes sense. I suspected it was something like this.
It's weird though as the WindowsGL MonoGame platform (which I believe also uses OpenAL) doesn't seem to attenuate like this.
I guess audio in XNA is pretty limited really in terms of control, many DAWs give you a choice of the 'pan law' used in this scenario with either no attenuation, full attenuation or (I think) -6db attenuation which is kind of a half way house between the two. I usually use the latter for mixing as sounds tend to be perceived as louder when panned hard left or right even if they are the same volume.
Anyway, that's a digression, thanks for the input - it's good to know I'm not going nuts!