I FINALLY FIGURED IT OUT!! So the big hint was that the TOC wasnt even rendering correctly. Using the HTML example at:
http://calibre.kovidgoyal.net/user_manual/xpath.html
I was able to fix my mistakes in setting up the chapters. It was tedious but well worth the effort. Calibre had no problem finding the chapters after setting the code the correct way. Karma for everyone who remotely attempted to help! thank you so very very much for all your help folks!! READ ON!