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Hmmm... This is turning out to be quite the puzzle.
The original issue is gone. Thanks again Mamba.
I got my 2nd issue fixed and working today by selecting default permissions within the tool and then manually setting the permissions for each category (access,View, Reply, Post etc) and it appeared to work fine for admins and registered users.
I then added a new post as admin for new users to read (basic post here 1st and introduce yourself type post), I made it sticky and then proceeded to change the order of the blocks. Now when a registered user goes in and selects the forum link or clicks the link in the "Recent Topics" Block it takes them to a blank page. ARGH! lol Back to the blank white page problem.
I tried the XOOPS tools to reset the cache again just in case that was the problem. No luck.
I will continue poking around but if anyone has any suggestions... I'll probably be here all night lol