IT IS 10am in Dundee and a dozen people are shaking their buttocks, really rather vigorously, to Bootylicious by Destiny's Child. Most of them are Scottish, and some are hungover, yet they are bouncing around with no obvious discomfort or embarrassment. Here's why: they are actors. This is a warm-up exercise ahead of the day's rehearsal of Sunshine On Leith, the musical based on songs by The Proclaimers. It is the first of March, three weeks into rehearsals of what is proving a very complicated show to stage. "This," grins the actor Keith Fleming, "is a beast which must be tamed."

We are on the top floor of Dundee Rep Theatre in a large space with a slight air of magical attic. Props from this and previous shows are scattered about - a hospital bed, an old writing desk, a brace of pianos, a busted toilet. Stephen Greenhorn, the writer of Sunshine On Leith, is rolling around, performing wheelies in a wheelchair like a flamboyant Paralympian. Then he gets up and walks over to a table, pops a choc in his gob and slumps into a chair, grimacing at the throb in his head, a necessary penance after his pub quiz triumph the night before.

It's important to make it clear straight away that although it features loads of their songs, Sunshine On Leith is not about The Proclaimers. This is not their story. The plot concerns two soldiers, Davy (played by Fleming) and Ally, who return home to Leith after fighting in a desert war - whether Iraq or Afghanistan is not specified. Ally plans to propose to Davy's sister, Liz. Davy is starting to see Yvonne, a nurse with a lot of relationship baggage. Meanwhile, Davy and Liz's parents, Rab and Jean, are planning their 30th wedding anniversary, but a secret from Rab's past, a long-buried emotional landmine, threatens to blow the family apart.

Sunshine On Leith has lots of great songs and jokes - in short, it's a top night out - but is essentially quite a serious piece of theatre. Kevin Lennon, who plays Ally, calls it "a state-of-the-nation enquiry" - an exploration and celebration of working-class life in Scotland.

Watching rehearsals, it's clear how seriously everyone is taking this production. They are very aware of the weight of public expectation, but more than that there's a sense they have set themselves a real challenge and are going to have to work hard to get it right. There is a cast of 15, a nine-piece band, plus a core creative team of four. The six main cast are all part of Dundee Rep's permanent ensemble, none of them trained performers of stage musicals, and they have only nine weeks to perfect over 20 difficult songs, complicated movement and dance routines, and some very taxing scenes. "This is a painstaking process," says the director James Brining, an amiable 38-year-old with a touch of Steve Coogan around the eyes. "Mostly pain."

When Brining became an artistic director of Dundee Rep in 2003, he and Greenhorn began to talk about creating a brand new Scottish musical. The plan was to hire a composer to write new songs, but this didn't work out. "So," says Greenhorn, "we started toying with the idea of a jukebox' musical, a Scottish equivalent of - and I hate these comparisons - Mamma Mia and We Will Rock You, where you take a single band and use their back catalogue. But when we started looking at Scottish bands we didn't get very far. They either had only one interesting album, or else a back catalogue where a lot of the songs were very similar thematically."

Among the acts considered were Deacon Blue, Simple Minds, Hue And Cry and Alex Harvey. "Then the Eureka moment was one night I was sitting drinking and listening to This Is The Story (The Proclaimers' 1987 debut album) and thinking just how unusual those songs were. It suddenly occurred to me: This might be it.' They write songs in such a peculiar way that gives you access to a whole range of different characters and perspectives and emotions. So it's not just songs about, I'm in love and feeling very happy.' It's more like, I've got drunk and I've just beat my wife, and I'm not in love with my wife any more, I'm in love with somebody else's wife.'"

In addition to the subject matter of the songs, the fact that The Proclaimers perform in Scottish accents seemed appropriate. It would mean the actors could speak their lines and sing the songs without switching voices; script and score would flow into each other without artificiality or awkwardness.

"I was so drunk that I wrote the idea down because I knew I would forget it," Greenhorn continues. "Then the next morning I woke up, and had forgotten, but I saw the words on a piece of paper - The Proclaimers Musical. I burnt a CD with about 25 songs for James, and posted it with a note that said, Sit down and listen to this and then phone me.'"

Brining had doubts. "I immediately went, That's a brilliant idea,' but I wasn't convinced it could work. Maybe because I was a bit snobby about this kind of musical. It seemed less creative to use existing songs than creating the whole thing together. There's no artistic merit in going, Which famous band can we hang this off? Right, let's make lots of money.' But I don't believe that's what we're doing with this project. This is about listening to what The Proclaimers' songs are about, and creating a script around them."

That's exactly what Greenhorn did. He went through each of the albums and started to pick out songs which could work within a show. He paid close attention to the lyrics, allowing them to suggest theme, plot and character. Greenhorn lives in Glasgow and his girlfriend is in London, and he discovered that you could play The Proclaimers' entire back catalogue in the time it takes to drive from one city to the other. "Poor bastard! That's torture!" declares Charlie Reid, one half of The Proclaimers, when he learns this.

Early in the process, Brining and Greenhorn made contact with The Proclaimers' manager Kenny MacDonald, seeking permission to use the songs. "We also wanted to make sure he understood we were only going to choose songs based on how they fit in our show," says Greenhorn. "It wasn't just going to be a parade of greatest hits. In fact, the one that was most likely not to make it was 500 Miles, which everyone assumed had to be in it. Until quite a late stage, we were wrestling to find a way to make that work. That was the only song where we felt there was a real problem about whether we would be able to control the crowd."

The Proclaimers - Craig and Charlie Reid - are perhaps the most underrated writers in Britain, and most of the cast and crew have experienced a gradual revelation of just how good these visceral, cerebral songs are. "As soon as I started listening to their work in detail my appreciation shot into the stratosphere," says the musical director Hilary Brooks. "They write brilliant vignettes combined with fantastic melodies which appear to be very simple. But their phrasing is incredibly difficult and they have very high tenor voices though they can also sing quite low."

Brooks has asked the actors not to listen to the albums, and focus instead on her rehearsal score. She has reworked the songs, but also tried to remain reasonably faithful to the original versions. "It's done with respect," she says. "I would have the same attitude towards a score by Kander and Ebb or Gershwin."

One important aspect of The Proclaimers' music is their left-wing edge. The musical is largely about love and relationships, but Greenhorn has not shied away from including some political content, mostly concerning the corroding effect of private finance on the NHS. Brining insists that, although the production will be running in Dundee during the campaigning period of the Holyrood elections, "this won't be a party political broadcast for anybody". He admits, however, that the musical would be quite different had it been written and staged in 1997. It contains a strong sense of disillusionment, a feeling that life has not improved under New Labour.

Sunshine On Leith is not, however, an anti-war play. In an early draft, Ally was suffering from post-traumatic stress disorder, but this was later written out. "I have to be careful not to harness the songs to some particular polemic," says Greenhorn. "If I was going to make a comment on the war then I would do it elsewhere where it's just my name on it. The Proclaimers are perfectly capable of making their position on the war perfectly clear and I wouldn't presume to do it for them."

MONDAY, March 26. Over chicken sarnies in an Edinburgh hotel, The Proclaimers are making their position on the war perfectly clear. "Iraq is an unmitigated disaster," says Charlie Reid, "and Blair is a war criminal. We have nothing but respect and affection for the service personnel out there doing a job, but the men who sent them are responsible for a disaster. The greatest British Prime Minister was Harold Wilson because he kept us out of Vietnam. Tony Blair should have realised before this happened that we were being sucked into something that had no legal basis whatsoever. We are unequivocally opposed to the war in Iraq and our soldiers should be brought home. Print all of that please."

Though as yet unnamed, the new album by The Proclaimers - released on September 3 - is a more political record than they have made for a while. One song, The Long Haul, addresses the idea that the war on terror may last for decades. "There is a threat from militant Islam, of course," says Craig Reid, "But it has been exacerbated a hundredfold by invading Iraq."

The Proclaimers have spent the morning in their rehearsal room being photographed with the Sunshine On Leith cast. It was the first time the musicians and actors had met, and the atmosphere was one of mutual appreciation, especially when the Reids learned that Gail Watson, who plays Liz, is related to two former Hibs players, Gordon Hunter and the late Willie Hamilton.

They have not been involved with the creative process, but the Reid twins are fully behind Sunshine On Leith. That said, they are not fans of the genre, and have a particular horror of The Sound of Music. "When you hear the word musical' sometimes you're tempted to reach for your gun," says Charlie. "But the way that they've done it is a clever and legitimate use of the songs."

I mention that James Brining thinks their songs are a kind of national heritage, that on some level they belong to the people of Scotland. They seem to accept this, but start to squirm when I say something about the affection in which they are held in this country. "I don't know," says Charlie, shaking his head. "There are people who truly love us, others think we are a comedy or novelty thing, and undoubtedly there are people who loathe us too. In a perverse way we quite enjoy the negative reaction."

Craig grins. "We were 14, 15 when punk happened, and that was one of the most pivotal things in our musical education," he says. "I like that people are against us. It's not that we want to provoke, but I know that every time we go on television there are people sitting out there whose day we have really f**king spoiled." He gives a small sigh of pleasure. "I do enjoy that."

It was Friday, January 30, 1987, when The Proclaimers made their television debut, performing Letter From America on The Tube. Millions of people were watching at home, some no doubt having their day spoiled by this unexpected glimpse of what appeared to be two Buddy Hollys channelling the restless spirit of Hugh MacDiarmid. In deepest West Lothian, 22-year-old Stephen Greenhorn was gobsmacked. When he heard them sing the word "Bathgate", a jolt of electricity shot up his spine and has yet to come down. This was the moment when the spark that would flare into life as Sunshine On Leith began to gently glow.

DUNDEE Rep Theatre, March 30, 2007. Twenty years on from that seminal TV appearance, The Proclaimers are at number one in the charts with the Comic Relief version of (I'm Gonna Be) 500 Miles. "That's brilliant," muses Kevin Lennon. "It feels like providence. Like it's somehow all connected."

After seven weeks of rehearsals, some of the actors are feeling a strong connection to the songs. "My personal favourite is Sunshine On Leith," says Keith Fleming. "Apart from the fact that I'm a Hibs supporter and the song is a terrace anthem, it has a huge personal relevance for me in its staging and setting."

The song is performed at the hospital bedside of a character who is critically ill. "I lost my fiancée last year to cancer," Fleming explains, "so to be sitting in a seat in a hospital waiting room is quite a tough emotional moment for me. I don't really have to bring any acting to that scene."

Ann Louise Ross, who plays Jean, says that she too has a deep emotional connection with her character. "In the play, my daughter Liz decides to leave home and go to America. In real life, when my son Fin left home I found it a very, very difficult time. I almost felt a sense of bereavement and wondered Where have the years gone, and what's my function now?' I've been able to draw on those feelings in the play in the scene where Liz tells her mother that she's going. We have a little scene together and then I have to start the song Letter From America, but the scene makes me cry and I'm finding it really difficult to get into singing the first verse."

Letter From America is one of the key songs which the cast and crew know they have to get right. Two years ago when they first started holding secret workshops, the performance of Letter From America convinced them that a Proclaimers musical might just work. "It was really powerful,'" James Brining remembers. "There was an absolute hush in the room as everyone sensed this massive, pent-up collective emotional response to the song."

However, with only four weeks remaining before the show opens, rehearsals for the song have not been so successful. According to Gail Watson, when they performed it on Saturday - they are working six-day weeks - it wasn't up to scratch.

"It's a creative process and sometimes doing it wildly wrong is the most positive thing," she says. "We finished Letter From America and the director, writer and choreographer all had this perplexed look on their faces and didn't say anything for a couple of minutes. So you have an idea that either they are absolutely stunned or they think it's keech. Then the director said, I'm not getting the poignancy that I want from this. I don't think we've really nailed it.' So you just have to go, right, cool, back to the drawing board. And when we came back in on Monday we got it."

Jitters and setbacks are an inevitable part of any rehearsal period, especially when preparing an entirely new work. The important thing is that there is a sense of overall forward momentum, and Sunshine On Leith certainly has that. For proof, see the joyous, life-affirming staging of Let's Get Married (set in a Hibs theme pub) or Ann Louise Ross's angry, upset rendition of Hate My Love. In the end, what makes Sunshine On Leith work so well is that the songs have passion and honesty, a heart-on-sleeve quality exactly in keeping with the best traditions of the stage musical genre. It's West Side Story set in the east of Edinburgh.

After its run in Dundee, Sunshine On Leith will travel to Edinburgh, Aberdeen and Glasgow. Could it work outside Scotland though? James Brining, who is English, isn't convinced it would succeed in London - "That's not a lack of confidence, just that it's about a particular Scottish experience" - and Ann Louise Ross reckons they should take the production straight to America, Australia and Canada.

However, the choreographer Lizzi Gee - who has a great deal of experience of West End theatre - believes Sunshine On Leith would do well in one of London's more intimate venues. She thinks, though, that an English tour could be a real phenomenon. "If you have to put a star in it then what about Peter Kay?" she suggests. "He's doing The Producers tour at the moment because he's a fan of the film. Now, he's a fan of The Proclaimers so he might do a stint and sell thousands of tickets."

Stranger things have happened, but for the moment Sunshine On Leith still has around three weeks of rehearsal time before the curtain goes up on the first night. I leave the cast to their songs of love and sex, homecoming and exile, misery and happiness, and head out into the early evening sun. Stephen Greenhorn, meanwhile, is already contemplating his next project. "The Billy Bragg musical," he says, "now that would be interesting."

Sunshine On Leith is at Dundee Rep Theatre, April 18-May 12; Edinburgh Festival Theatre, May 15-26; His Majesty's Theatre, Aberdeen, May 29-June 2 and the King's Theatre, Glasgow, June 5-9. See www.

proclaimers.co.uk for upcoming concerts this summer and in November