Hey Simon,
I just looked into the F2370, and you are correct, it does not support SpyBiWire (SBW). I apologize for saying that IAR used it.
I had assumed that IAR was using SBW because it seemed to default to it when the F2370 device was selected. (see below). I believe this is the same thing you were seeing so you edited the .mnu file.
In the IAR release notes, it seems their debugger actually autodetects if SBW of JTAG should be used. See the "New Features" section. This is probably why IAR still programed and ran the board just fine.
I'll confirm at the office in the morning when I have the hardware available.
I'll also give you the exact version info for everything in my setup. Are you running Win7 or XP on your first machine? If XP, I'll try to find a machine to test with.
Thanks,
JD