Can you tell me where I can find a manual for how to use the dialog system please?

The project file should have a note with the manual in it.

But you can also see it online: https://pikkua.com/software/manuals/dialogue-engine-manual.html

Thank you for that. As a new Gamemaker user (I am using the Gamemaker studio downloaded from steam) - I assume I can download the latest 2.3 version of the plugin? If so how do I import it to Gamemaker - as with the newer version Tools -> Import Local Package doesnt allow me to select a .yyp file.

Thanks for all your help in advance. 

You should be able to do File -> Import Project.

If you have an existing project and want to add this to that, then you might have to manually add the files afterwards (for example dragging them from the file explorer to the gamemaker project).

Let me know if you need any more help.

Thanks for this - I manually dragged the scripts in until I got it to output. 

As a further question - how can I handle cutscenes with the dialogue engine (is it even possible?).

so for example I am aiming to load the dialogue when we hit specific lines in the script load in the relevant images?

switch (_scene_position) {
    case 0:
         if !textbox_exists() {
            textbox_create(
            dialogue[? "scene1"][? "line1"][? "text"],
            dialogue[? "scene1"][? "line2"][? "text"],
            dialogue[? "scene1"][? "line3"][? "text"],
            dialogue[? "scene1"][? "line4"][? "text"]);
            textbox_set("The Narrator",c_black,c_white,noone,1,fnt_main_font_good_times,spr_profile_the_narrator,true,noone,35,true);
            //textbox_set("The Narrator", c_blue,c_white,c_white,0.7,fnt_main_font_good_times,noone,true);
            //Add voice acting
            textbox_add_voice(1,true,true,
            snd_scene1_narrator_line1,
            snd_scene1_narrator_line2,
            snd_scene1_narrator_line3,
            snd_scene1_narrator_line4);
            _scene_position++;
            show_debug_message("end of line 1");
        }
        break;
    default:
        // code here
        break;
}

so iin my example here I would like to animate and fade in an image at line 3 of the dialogue? I there a way I can ask what line it is current on?

You can probably use message_current variable to check what line it is in. For example:

if (textbox.message_current == 2) {
   // Do stuff
}

Let me know if that helps. I also have a Cutscene engine that could make making cutscenes easier.

Edit: Also, I think it would be easier to first do some dialogue, then some other cutscene stuff and then the rest of the dialogue.

Sidenote: I edited your post to use code block formatting.

how do I import it to Gamemaker - as with the newer version Tools -> Import Local Package doesnt allow me to select a .yyp file.

I just realized you were talking about yyp file and not yyz.

I’m not sure how to open yyp files. I think you can just double click it? But if you have a yyp file of this asset, you probably bought it from GameMaker Marketplace. If you buy things from there, you can easily add them to your project using the Marketplace library.

I know you were able to add the files to your project, but I’m just saying this for future reference.