Start a new drawing from your good template where everything works.
Copy/Paste ALL from the other drawing.
Win 7 Pro, 32 bit; Intel Core i5 @ 2.80GHz; 4GB RAM—Civil 3D 2008 & 2011
Credit where credit is due! Give kudos or accept as solution whenever you can.
rkmcswain.... in the linetype file, the text style does have a height defined (.06)
That is most likely your problem. Set the fixed text height to ZERO.
I see you worked around it by starting a new drawing, but knowing how to fix it in the future could save you some time.