I reviewed the Messaging settings as you suggested and sure enough you were right, under Plugins->Message Outputs->Default message outputs, the following 2 settings were unchecked, I checked them and all looks good now. Thanks a million.
It would be nice if Moodle disabled the ability to enter and send messages under these circumstances, or provide a message to indicate why messages are not successfully sent...its easy to believe messaging is enabling and working when you can enter a message and click send.
