Ah ha! Thanks to firebug and trawling through the code, I've managed to work this out.
If using "Is a List" to create a drop down list, the "Default" field becomes the "Possible Values" field. You put in the possible values separated by a ';'.
The question now then, how do you specify a default value if the "Default" field is being used for something else? Looking at the code, it seems this functionality is absent.