Thanks for the response. I have been playing around with this for the past few hours and finally managed to figure it out.
I have also read some other forum threads with many complaints about the tedious process of adding options to products ( we are required to add many simple products).
I have a furniture store with 5 frame color options and 20 cushion color options for about 300 different products. This means I would have to create 25 x 300 different simple products. That is a ridiculous amount of work.
Can we get any input from the Magento team on how this will work in the final release?