I was able to make a decent amount of progress during the previous weekend, the bed structure is now basically complete. There is still a bit of finishing needed, and the roof needs to be built, but I'm happy with the speed of progress so far.
I wanted to be able to remove the safety rails if at some point we found they were no longer needed as well as in the interest of being able to disassemble the bed. I also want to be able to look at later building a structurally identical bed and stacking them should that be a requirement. With that in mind I had to add a section above the bed structure to widen the top part of the leg, both for adding a slit for the safety rail and for a wider support base for a top bunk.
I cut these to be the same height and width as the existing posts and setup the table saw to cut the corner out (together with the corner cut out on the current post this will then form a slot).
http://i.imgur.com/JyY8tIR.jpg
Unfortunately the two cutouts (even after measuring and doing a test fit...) ended up not being completely even... I'm pretty disappointed with this, however it won't be readily visible so I will leave it at that (I made a complete hash out of one section so had to redo it from scratch).
Next step was making the rails, for this I cut sections of brandering (36x36mm) to length and cut shoulders on both ends to fit into the slots in the legs.
I then decided on a distance for the uprights to be apart so that a head couldn't fit through it, divided by the distance I had to cover and rounded down, the distance between centers ended up being 118mm so the actual gap would be 118mm - 19mm = 99mm (I'm using 19 mm dowels). All the dowels were cut to size on the mitre saw using a stop. I found a 3/4" wood spade bit to be the perfect size to get a snug fitting hole for the 19mm dowels. The next step was measuring out and drilling the holes for the dowels to fit in, I drilled these roughly 10mm deep.
I rounded all the edges on the rails so there would not be any sharp edges.
I made 3 spacers at 200mm in length so I could clamp the top and bottom rail together but not squeeze it in too far as not all the dowel holes were exactly the same depth (I don't have access to a drill press, its on my wishlist though...). A quick test fit to make sure we don't have any problems and then came gluing. I used quite a bit of glue to make sure we fill the void and get a bit of squeeze out for a good strong bond as I decided against using any screws.

Happy with the fit!
I also added strips to the inside of the bed-rails to support the hybrid slats/base.
I decided on this design as I wanted to have the base removable. I used boards I have available (the holes were drilled for a previous application). I intend on drilling a couple more holes in due course.
Here are a couple of photos of what the bed looks like now. (please excuse the messy workshop!)
I started doing the final filling and sanding as painting the base coat on Sunday. SWAMBO want's the bed to be white (I agree that this would look good in the room as the cot is also white) and this gives me a bit of an opportunity to get away with patching some of the mistakes and nail holes with filler before painting.
I also started cutting the various parts for the roof, however there isn't much of interest to post about there.
Thanks for looking!