Well, I got it to the point where straight stitches are working, once going. Whats happening now is that when the machine *starts* sewing, I still get that bunching of thread on the underside, but only for the first few stitches.
Full size see here:
http://www.pbase.com/mchad/image/144061375 - looking at the image, you can see where i started on the bottom right: I sew going left, where I stop, rotate 90deg cw, sew a bit, stop again, rotate again and sew to the end. At every start, it bunches for a few stitches.
To reply to some of the comments: I need to use this thread. It is for a marine canvas, so I need UV proof thread. The thread is Gore (as in Gore-tex) Tenera V92 which is a lifetime thread, and is the thinnest thread they make for marine canvas applications. So no options there. I am currently using a #16 needle, installed and threaded correctly (which is right to left per the manual, by the way - needle bar thread giude on the right as well), which I have found is recommended for this thread by the mfgr. The thread is VERY slick, with the tension I have it dialed to. If I put in a much thinner cotton or nylon thread at the same tension, it is three times harder to pull through. As before, I do have the machine and bobbin threaded exactly as specified in the manual. All I did to get to this point is endless changes to both the bobbin and upper tensions. The machine seems eager to go through many more layers (I bought some similar weight canvas to practice on) then I will actually need to, so im not worried about that. And as this is already sewn, and I am just planning on going over the existing, disintegrating thread, i'm not worried about needing a walking foot.
If I can get that remaining bunching sorted out, I will be good. For this project at least.