What information does the Consolate use to decide if a sponsor is required. Between starting the K1 process and now (NOA2 stage) She has had a substantial increase in her income. Previously we were right on the boarderline for needing a sponsor. Now it appears we are reasonably over the limit

My guess is the previous tax returns are to look at stablity, job history and supporting info about the person. The current payslips are to judge and decide wether the level of income is sufficent or not.

Is this correct, or am I missing somthing?

When you file the I134 you must check the poverty guideliness (I864P), and the petitioner must earn 125% of the table. If not, he/she needs a co-sponsor.

Take a look at the 2008 Poverty Guidelines. If you make the minimum for the household size then you will probably not need a cosponsor.

For proof you will need a letter of employment, tax info (number of years depends on the consulate) and recent paystubs.

Good luck