Ok. Here is what happened.
After spending almost half my weekend stuck on this problem and taking all your advice and trying all possible troubleshooting steps, I finally decided to contact Microsoft. Believe me, I hated doing it and I was dreading having to pay their weekend rate to open a case with them.
After spending less than 15 minutes with a MS tech who came into the server remotely, he determined that my server was fully updated and that all my settings were correct. He downloaded a Rollup update packagae and deployed it. PROBLEM FIXED. I was refunded my money for this case because this was not availabel in the updates from the MS site. I'm still unclear on what update fixed the issue, but I was very angry that whatever it was, it wasted a great deal of my time.
I'm closing the case. Thanks fro all your help on this guys.