I'm so glad to see this is "solved", kind of adds new meaning to the word.
In any case, we've just gone through a process of pretty extensive upgrades of our gis servers and other bits of associated software, and I don't think there is any going back to 10.0 at this point. All along the way, I just KNEW this was going to happen.
Thanks for your input Phil, I do appreciate your help.
I have just been informed by our GIS group that they are upgrading to Arcgis 10.1. We are currently using Civil 3D 2012 but can move to Civil 3D 2013 if the connection issue has been resolved.