For anyone interested in a solution to this problem I have figured it out - but I would never have achieved it without a lot of help from duchess110. We've spent the past few days exchanging PMs and - EURIKA - we have the answer. 
This only applies to users who do not have their content stored in the iClone default location which is:
C:\Users\Public\Documents\Reallusion\Template\iClone 5 Template\
The first thing that needs to be done is to make sure that the avatar in question has a persona available. If there is no persona associated with the Avatar, then save it by right clicking and selecting Export Persona from the menu, the file will be saved as a .lua.
Exit iClone and locate the file that was just saved, in my case it is in:
H:\IC5\Custom\iClone 5 Custom\Persona\
Right click on the lua file and select "Open With", I opened my file in Word Pad.
Scroll down the file until you find the motion path for the first motion, it should look like this:
Clips = {
AnimationClip = {
[ 1 ] = {
ID = "2LegsBiteAttack";
TargetType = "Character";
TargetNode = "$";
ClipType = "Motion";
ClipLocation = "C:\\Users\\Public\\Documents\\Reallusion\\Template\\iClone 5 Template\\iClone Template\\Motion\\BEAR\\2LegsBiteAttack.iMotion";
ZeroRoot = true;
Priority = {
[ 1 ] = {
ID = "01";
Node = "$";
Value = 200.000000;
Change the "ClipLocation" line to this:
ClipLocation = "$\\iClone Template\\Motion\\BEAR\\2LegsBiteAttack.iMotion";
This needs to be done for every motion listed in the file.
Look at the path carefully and make sure to remove only the following, and replacing the C with a $:
"C:\\Users\\Public\\Documents\\Reallusion\\Template\\iClone 5 Template
When all is done save the file, open iClone, select your Avatar and import the persona that you saved. Now the right click menu will work as it should. 
Once again many thanks to duchess110 - Linda, for taking the time to help me sort this out. 