Hi!
Thanks for your swift responses! Some of the mystery now begins to lift... I agree that the Eliza in the 1861 Census is too young to be James' mother - I was reading into a previous posting about a young, unmarried mother giving birth in the workhouse, however, 14 is a bit young, even for those days!
However, that second posting by DOB7 sheds some light on the mystery. If William Waterfield and Elizabeth Waterfield were witnesses at William Martin's wedding to Joanna, then it makes sense that the connection should be through Elizabeth, m.s. Martin.
William Martin was definitely married to Joanna (Johanna in other censuses) The 1861 Census appears to be a transcription error as all the names and dates fit with other censuses, leaving Joanna as the only reasonable option. Nursing children were often farmed out to close relations, so James M Waterfield's presence in the Martin household would indicate a close relationship to one of his parents - in this case, Elizabeth.
If I find out more, I'll let you know!
Ross.