K, given the last code stuff a bunch of testing, unfortunately, I ran into two problems :
- The lines overwrite the vertical scrollbar if present

- The lines disappear if you scroll the grid data horizontally

So in a nutshell I'm back to my original attempt which so far touch wood works in all scenarios. I havent got any more time to invest working the weekend atm so I'm going to leave it at this. Thanks to everyone for the help, it was very informative.

Nice job with this draw filter.  I will have to file this away just in case I need this later on.  Or perhaps Infragistics can write this up in a KB article??

Thank you very much that was a big help I made some changes to account for rows where there are no merged cell records - ending up with :

private void ProcessRowColRegionIntersectionUIElement(RowColRegionIntersectionUIElement rowColRegionIntersectionUIElement, UIElementDrawParams drawParams)
        {
            Dictionary<UIElement, Rectangle> borderRects = new Dictionary<UIElement, Rectangle>();

            foreach (UIElement element in rowColRegionIntersectionUIElement.ChildElements)
            {
                MergedCellUIElement mergedCellUIElement = element as MergedCellUIElement;
                if (mergedCellUIElement != null)
                {
                    Rectangle rect;
                    UltraGridCell cell = mergedCellUIElement.GetContext(typeof(UltraGridCell)) as UltraGridCell;
                    if (cell != null && cell.Column.Key == "ShiftDate")
                    {
                        rect = Rectangle.Empty;
                        UltraGridCell[ mergedCells = cell.GetMergedCells();
                        foreach (UltraGridCell mergedCell in mergedCells)
                        {
                            UIElement rowElement = mergedCell.Row.GetUIElement();
                            if (rowElement != null)
                            {
                                if (rect.IsEmpty)
                                    rect = rowElement.Rect;
                                else
                                    rect = Rectangle.Union(rect, rowElement.Rect);
                            }
                        }
                        borderRects[mergedCellUIElement] = rect;
                    }
                }
                else
                {
                    RowUIElement rowUi = element as RowUIElement;
                    if (rowUi != null)
                    {
                        // Account for rows that are not merged with any others
                        UltraGridCell[ mergedCells = rowUi.Row.Cells["ShiftDate"].GetMergedCells();
                        if (mergedCells == null || mergedCells.Length < 1)
                        {
                            UIElement rowElement = rowUi.Row.GetUIElement();
                            if (rowElement != null)
                                borderRects[rowUi] = rowElement.Rect;
                        }
                    }
                }
            }

            foreach (Rectangle rect in borderRects.Values)
            {
                using (Pen pen = new Pen(Color.CadetBlue , 1))
                    drawParams.Graphics.DrawRectangle(pen, rect);
            }
        }

I would like to say a big thanks for the support, cheers. 

 Very interesting will be able to try out in 2 hours - thank you very much for the input and continued response - its appreciated.

Okay, then how about this approach:

public class MergedCellBorderDrawFilter : IUIElementDrawFilter
    {
        #region IUIElementDrawFilter Members

        bool IUIElementDrawFilter.DrawElement(DrawPhase drawPhase, ref UIElementDrawParams drawParams)
        {
            // This switch is really unneccessary, it's just a sanity check
            switch (drawPhase)
            {
                case DrawPhase.AfterDrawElement:
                    // Another sanity check
                    if (drawParams.Element is UltraGridUIElement)
                    {
                        UIElement dataAreaUIElement = drawParams.Element.GetDescendant(typeof(DataAreaUIElement));
                        foreach (UIElement element in dataAreaUIElement.ChildElements)
                        {
                            RowColRegionIntersectionUIElement rowColRegionIntersectionUIElement = element as RowColRegionIntersectionUIElement;
                            if (rowColRegionIntersectionUIElement != null)
                                this.ProcessRowColRegionIntersectionUIElement(rowColRegionIntersectionUIElement, drawParams);
                        }                       
                    }
                    break;
            }

            return false;
        }

        private void ProcessRowColRegionIntersectionUIElement(RowColRegionIntersectionUIElement rowColRegionIntersectionUIElement, UIElementDrawParams drawParams)
        {
            Dictionary<MergedCellUIElement, Rectangle> borderRects = new Dictionary<MergedCellUIElement, Rectangle>();
            foreach (UIElement element in rowColRegionIntersectionUIElement.ChildElements)
            {
                MergedCellUIElement mergedCellUIElement = element as MergedCellUIElement;
                if (mergedCellUIElement != null)
                {
                    Rectangle rect;
                    UltraGridCell cell = mergedCellUIElement.GetContext(typeof(UltraGridCell)) as UltraGridCell;
                    if (cell != null && cell.Column.Key == "Int32 1")
                    {
                        rect = Rectangle.Empty;
                        UltraGridCell[ mergedCells = cell.GetMergedCells();
                        foreach (UltraGridCell mergedCell in mergedCells)
                        {
                            UIElement rowElement = mergedCell.Row.GetUIElement();
                            if (rowElement != null)
                            {
                                if (rect.IsEmpty)
                                    rect = rowElement.Rect;
                                else
                                    rect = Rectangle.Union(rect, rowElement.Rect);
                            }
                        }
                        borderRects[mergedCellUIElement] = rect;
                    }
                }
            }

            foreach (Rectangle rect in borderRects.Values)
            {
                using (Pen pen = new Pen(Color.Red, 3))
                    drawParams.Graphics.DrawRectangle(pen, rect);
            }
        }

        DrawPhase IUIElementDrawFilter.GetPhasesToFilter(ref UIElementDrawParams drawParams)
        {         
            if (drawParams.Element is UltraGridUIElement)
            {
                return DrawPhase.AfterDrawElement;
            }

            return DrawPhase.None;
        }

        #endregion
    }