I'm afraid that I don't have an answer for you, but I too have seen a caterpillar much like this one except the colours are different. I saw it today (18th July 2010) whilst walking in the Dorset countryside. It got very aggressive when we tried to move it from the road. It stuck its abdomen up in the air and pointed its forked tail at us.
If I find out what it is I shall let you know.
Thank you so much for taking the time to reply and for giving such great information.
We put the caterpillar into a Willow tree so I'm glad that was the right decision! I will look out for the adult moth at a later date.