A 2cm long caterpillar which looked like a rectangular sponge finger with dark chocolate, white and yellow sugar icing !!. The caterpillar had raised knobs on its thorax and last two abdominal segments - four each. Each of these knobs had retractable orange bristles. Pic #2 shows head end, Pic #3 the rear end and pic #4 shows retracted bristles. The pro legs were translucent and appeared to do little to facilitate locomotion - they protruded horizontally along the sides of the caterpillar.
Eucalyptus trees ( this species unknown)
Inspired by martinl, I trotted down the road to check the tree where I had spotted the cup moth cocoon a few days ago and sure enough there were two caterpillars on the tree - probably later instars. contact with the bristles is supposed to have nasty side effects !