I have just spent about 10 hours over 3 days researching and trying different steps in forums and troubleshooting guides dealing with this. Ultimately, I thought my 328 chip was dead. If it was really dead, then I had nothing to lose trying to re-install the bootloader.
I made a parallel connector, which was documented on this website and I used it. It worked perfectly. My confidence was restored until I tried to upload a sketch and had the same problem again.
After a quick run through all of the previous attempts at a fix, I decided to try uploading the sketch with the parallel connector. This worked! My board programs and works fine. However, this confirms the problem is with the communication on the serial side.
I will continue to chase the communication problem, however I can also continue to use my Arduino now via the parallel programmer.
The directions for making a parallel programmer are here:
and what you need to do for uploading sketches is located here:
I hope this helps someone, my eye's hurt from all the reading I did to track down this simple set of steps that turned out to be right in front of me.
If only I had known what the question actually was...