Stagg lived under suspicion until new suspect was charged

It was a sunny morning on 15July1992 and Ms Nickell, 23, had driven from her home in Balham to Wimbledon Common with her son to take the family dog Molly for a walk.

But at a secluded spot and in broad daylight she was violently attacked. Alex looked on as his mother was sexually assaulted, stabbed and had her throat slit. When her body was discovered by a passer-by, Alex was found clinging to her pleading: "Get up mummy."

The toddler had even placed a piece of paper on her forehead in an attempt to heal her wounds, using it as a makeshift plaster. Police at the time thought the paper highly significant, possibly placed there by the killer in a sign of a ritualistic killing.

The hunt for Ms Nickell's killer prompted one of Scotland Yard's largest manhunts. In all, 32 men were arrested and 548 suspects ruled out as broadcasters endlessly showed a home video of Ms Nickell waving her partner Andre Hanscombe off to work on the morning of the day she died.

With pressure on detectives to catch the killer, attention quickly turned to an obvious suspect - Colin Stagg, a loner who lived close by in a council flat near the common.

A police search of his flat found walls painted black, a sheath knife, books on the occult and pictures of nude women. Police were convinced they had their man but had no evidence to prove it. Using a female undercover detective, they decided to set up a "honey-trap" operation - when a suspect is lured into an admission of guilt - in an attempt to extract a confession out of Mr Stagg.

Using the false name "Lizzie James", the detective and Mr Stagg exchanged a series of increasingly sexually charged letters to tempt him into an admission. But while he was encouraged to fantasise about sex, he crucially never admitted to murdering Ms Nickell.

Nevertheless, Mr Stagg was charged with the murder. But when the case came to court in 1994 it collapsed, exposing the Met and their tactics. Mr Justice Ognall, who threw out the "Lizzie James" testimony and with it the murder charge, accused police of "deceptive conduct of the grossest kind".

Despite his acquittal, the cloud of suspicion remained over Mr Stagg - not least because police had no other suspects - for several years until 2006 when new evidence led police to Robert Napper, who was charged with the murder last year and awaits trial in November.

Mr Stagg, who still lives in the same council flat in Roehampton, is trying to get on with rebuilding his life. His wrongful arrest and detention have taken their toll. In an interview last year with the Evening Standard, he told how he still monitors all callers to his flat with CCTV and how he had lost 14 years of his life. He talked of wanting to start a landscape gardening business and settle down with his new girlfriend.

Ms Nickell's partner has also struggled. After the murder, Mr Hanscombe moved with Alex to France, bringing his son up in a village overlooking the Mediterranean. Alex is 18 now but it has been reported that he has grown increasingly bitter about being deprived of his mother and what he describes as a "normal" family. In MrHanscombe's words he became a "brooding, moody teenager".

Mr Stagg's compensation deal will go some small way to making up for the years he lost as a suspect in the notorious killing; Alex, however, will never get over his mother's death.