HURRAY!!!!
First thing...........Thank you all for the great advice.
Turns out after all the frustration, cursing and stomping it was the needle. Rhonda spotted it, so I changed to a 75/11 and put the machine back together. By that I mean I took the back cover off and several other small covers here and there.
I did a test run on a scrap set up in the hoop and no breaking of the thread, no strange noises, no warning bells. Just a smooth run.
Oh, and I updated the software from Version 1.00 to 1.21