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Finally figured it out. SUSE Linux Enterprise Server comes with PHP 5.2.14 and 5.3.8. When I install the 5.2.14 and install XOOPS, everything works great. When I install 5.3.8. I get all the problems that I have described.
So there is something in the new 5.3.8 which prevents full functionality. Does anyone know what in PHP would make this work in 5.2 and not in 5.3?