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Issue has been resolved, the problem, occurred when I temporarily disabled steam guard authorized the device, and then reenabled steam guard. It appears that if any type of security information is changed, that the authorization is revoked. For future reference and assistance to other people.
tfredett[MF] has made a good representation of the problem i am experiencing on a windows system trying to share steam library on windows user account (family sharing beta tester) with another steam account on the windows guest user account on the same machine
I am unsure if this is a windows (8.1) or steam problem.
made me realise that this could be made to give better advice as the solution that made Family Sharing working for me and my friend may indicate this is misleading.
I found the solution in discussions so all credit to Cenosillicaphobic (ref:http://steamcommunity.com/groups/familysharing/discussions/0/648811852669621731/)
The solution was to log in to my friends steam client installed in the windows guest user account with my own steam account details and authorise the device from there. Whereas following the How To meant I was trying to authorise device from my steam client in my own windows user account (on the same machine)
SUGGEST EDIT:
I'm in the Beta! How do I authorize my shared computer?
As a selected beta participant, first in your friend's Steam Client opt into the latest Steam Client Beta Update and then log into their Steam Client with your own account details. Then, authorize a device to share via the “Account” tab in Settings, where you’ll find a button to "Manage Family Sharing & Devices", followed by a button to “Authorize this Machine.” Now family members and guests may log in to their own Steam Client as usual and play your shared games.