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FIXED IT!
Turned out to be a problem with the virtual path in the mainfile.php...
Found out by deleting everything and starting from scratch. Originally I had installed it with "http://www.domainname.com/" as the virtual path, which caused the problem. Reinstalled and used the defaults that XOOPS installer put in: "http://domainname.com/domainname.com_non_ssl/" for the virtual path. Physical path remained the came - c:\inetpub\vhosts\domainname.com......
Guess I should have took the XOOPS defaults at the beginning
It has something to do with the way my virtual hosting is set up on the server, and I was definitely using the wrong virtual path which caused the modules stuff to not be found, hence the conclusions above. But everything is working now! Sweet! Finally get to play with XOOPS and move my phpnuke stuff over
Thanks for your help!!!!!