OKAY... problem is SOLVED:
The SECRET KEY section of code was missing in my previously used wp-config.php.
Apparently, the wp-config.php file did not have this in WP 2.5+.
So, from the wp-config-sample.php I replaced this:
<em>define('AUTH_KEY', 'put your unique phrase here'); // Change this to a unique phrase.
define('SECURE_AUTH_KEY', 'put your unique phrase here'); // Change this to a unique phrase.
define('LOGGED_IN_KEY', 'put your unique phrase here'); // Change this to a unique phrase.</em>
with a new key generated from: http://api.wordpress.org/secret-key/1.1/
...renamed the file to wp-config.php, uploaded and replaced the "Old" one...and now it all works.
So you have to create a new wp-config.php using the sample one provided in the install package.