Solved the problem. Silly mistake on my part. I had the TX and RX pins on the arduino nano the wrong way round. Now able to get a response from AT commands but needed to have both NLandCR selected. Can also communicate now using BT Terminal.
Have tried connecting BT controller app, I select the HC-06 from paired devices but big blue button at the top still shows Not Connected. If I try to connect again I get a box up saying Close Connection to dropController Yes/No which seems to imply there is a connection although the blue button does not confirm this. I have not used any of the button options on the dropController to see if there is indeed a connection as I do not have the rest of the drop control rig set up yet. Just trying to confirm everything working at each stage of the build.