I have found a simple solution to the problem.
Remove the SoftwareSerial folder from the arduino 1.0 libraries folder.
Obviously the two instances of SoftwareSerial.h (one in the user library and the other native) was the cause of the compile error.
So, you want to keep the one that comes from who knows where, that may or may not be any good, and delete the one that is known to work and is supported. OK, whatever works for you.