William and Kate go walkabout in New Zealand

BLENHEIM, New Zealand - Britain's Prince William and wife Kate honoured New Zealand's war dead at a sombre ceremony Thursday, then delighted the crowds when they went walkabout in the small South Island town of Blenheim.

The royal couple laid a wreath of red roses at the town's war memorial for the centenary of World War I and marked a minute's silence, before moving along ranks of aged veterans lined up with medals pinned to their chests.

The couple, who kicked off a three-week tour of New Zealand and Australia on Monday, then prompted cheers as they chatted and shook hands with the crowds of fans waving British flags - some of whom arrived at 4.30am to grab a prime position along the barriers.

Their eight-month-old son Prince George, who enjoyed a play session with 10 Kiwi babies on Wednesday, stayed in Wellington where the family have based themselves for their 10-day New Zealand trip.

Kate, 32, wore a powder-blue Alexander McQueen frock coat with her hair tied back in a ponytail.

Blenheim resident Vicky King said locals could scarcely believe the couple had come to their town of about 30,000, which lies at the heart of the Marlborough wine-making region, with much of the population turning out to catch a glimpse of the royals.

"It's just so crazy that they came to Blenheim," she said after meeting Kate, describing it as a "surreal" experience.

"I was really nervous but she's a mum just like me... she was very easy to talk to." Her son Alton, who at nine months is just a little older than baby Prince George, startled Kate with a loud sneeze as she leaned in to look at him.

"She said 'Oh my goodness' and giggled - I said he was sorry he had a cold. The official behind her thought it was really funny," she said, adding: "Alton will be known for sneezing on royalty!"

William and Kate then met director Peter Jackson at the Omaka Aviation Heritage Centre, which the Oscar-winning filmmaker has spent millions of dollars turning into a museum.

Their guide was a World War II Spitfire pilot - Harcourt "Bunty" Bunt, still sprightly at 93 - who regaled them with stories of the heroics behind some of the exhibits.

William, a qualified helicopter pilot who served in Britain's Royal Air Force, was particularly taken with a Sopwith Pup biplane and hopped into the cockpit for a closer look.

"It's perfect. Start her up," he joked.

After the royal couple returned to the capital, they attended a state reception at Government House, where William unveiled a portrait of his grandmother Queen Elizabeth II.

The second-in-line to the throne apologised to Governor-General Jerry Mateparae about any night-time disturbances caused by baby George.

"He has been known to be particularly vocal at 3am, I swear I heard him doing the haka (Maori war dance) this morning," he said.

"He's a bonny lad and you'll be pleased to know he's currently preparing for life as a prop forward."