Received a version of this email from a client whose site had been hacked http://bit.ly/axythh
It seems many users site who run WordPress on 123-reg have had their sites hacked.
I found some more information here http://www.wpsecuritylock.com/malware-attack-meqashopperinfo-strikes-wordpress-hack-123-reg/
I have removed all the malicious code and reset keys on the clients site. All my other wordpress websites on other hosts remain fine. Are we to take it this was in fact a 123-reg issue and they are just trying to pass the buck.