Hi westfw...thank you for the in-depth response.
Nick, I didn't mean to offend...just very frustrated. I apologize if I did not understand your first post to mean that "many" people had succeeded. I wasn't getting anyone else saying that they could so I figured you were either lucky or using an AVR programmer (instead of the USB cable).
I will post my code first thing in the morning when I return to work. It's mostly cobbled-together bits of the Arduino examples (temperature readings from the temperature sample, COSM generated code from their website, and some NTP time-sync stuff from another example). No secrets or mystery...but I will definitely post in the AM when I can get to my machine. The storm in the northeast is preventing me from remoting into my machine to grab the offending code.
In the meantime, I did try Nick's referenced code and that did work. I have no idea why that will and a sketch containing nothing but String declarations will not (when > 30k).
I did the boot loader query and got the following: Although I'm not sure what to make of it 
Arduino explorer stk500V2 by MLS
Bootloader>? CPU stats
Arduino explorer stk500V2 by MLS
Compiled on = Sep 9 2010
CPU Type = ATmega2560
AVR_ARCH = 6
GCC Version = 4.3.3
AVR LibC Ver = 1.6.7
CPU signature= 1E9801
Low fuse = FF
High fuse = D0
Ext fuse = FD
Lock fuse = CF
Bootloader>