(slaps herself in the forehead!)

I have been dancing circles around the fact that my client side policy was being totally ignored and I couldn't get a trace file generated from WSE2 either.

Doh! I was configuring the component that was doing the web service call, but the configuration info needs to be with the main app!

I know this, but I suppose I have been too determined that I was doing something wrong in my WSE2 setup to have thought of it. So it's here for future googlers.