spcomputing,
As things turned out I had a bad 16u2, which I suspect is a pervasive issue with the 2560 board, but that is just an opinion. I received a full refund for the board and then bought two UNO R3's. Funny but everything simply behaves a LOT better as in everything works properly now. It really is a breeze vs. the amount of work the 2560 required to do the simplest da_m_n thing. Any way, my recommendation is to choose option (c) in you multiple choice comment stated earlier in this thread. Thanks for trying to help, I really appreciate it.
Kuba,
In my humble opinion I think you are pounding a lot of dirt to get the 2560/16u2 to work. The spec sheet on the MC is awesome but I don't think the makers have worked out the defects in production and there just doesn't seem to be critical mass support for that particular chip. I would encourage you to keep trying but perhaps it should be a 2nd or 3rd hobby because that dog (2560) just don't bark. Again, my opinion and I do apologize to anyone that is offended and or disagrees.