Mystery Solved. I just disabled McAfee firewall and it works fine then. Strange because I allowed MC etc. Even stranger is that it "partially" worked. At any rate McAfee Firewall = bad for MC Client access.
I'm rebuilding the images on the client and I'll let you know if the thumbnails look correct then...
Oh, and two slaps in the head for me for trying the obvious first.
I should mention that this might be related to a problem I had with our network at work. VirusScan Enterprise would DRASTICALLY slow down network connetions that locked part of a file. SourceSafe and a propriatary accounting system were affected.
It is a fully patched version of McAfee Personal Firewall on my home computer, but due to sharing some common code with virus scan... I could do some captures with Ethereal if you'd like, but it will have to wait till I'm home from holidays. I'll be gone 10 days...
Thanks Again