I FINALLY got the Moodle-Wordpress integration to work. Yippee!!!
Why I think it didn't work earlier:
(1) Previously I used a CPanel to setup my Wordpress site. This time I setup my WordPress site manually. This involved manually downloading the WordPress wordpress-3.5.2.tar.gz file; ftp'ing it to my webserver; using the CPanel's MySQL Database Wizard to create the MySQL database, MySQL username and password.
(2) I created a folder named blogs.dir inside the wp-content folder
(3) Somewhere at the end of the process, it still wasn't showing me a single sign on. So, I cleared all caches via "Site Administration | Development | Purge all caches". Bingo! That did the trick.
It took me 2 days to to get this right. A titanic battle indeed. Finally!!! At least I get to feast my eyes on the screenshot below...
...and the screenshot below...
If you notice (squint if you have to), in the upper right corner of both screenshots, the Moodle username and the Wordpress account names are the SAME! This is proof that Single Sign On (SSO) and login between my Moodle coursepage and my locally installed Wordpress is working.
The username "frankie" is a Course Manager with full posting rights (edit, delete, add, etc.) whereas the username "me" is a Student account with limited posting rights (add, view). I am tempted to blog about this with full screenshots, step-by-step instructions and a video walkthrough, but that'll take like a minimum of 3 hours. That will have to wait.
Links I used in this 'battle':