I actually got this to work this morning and have been trying to find a moment to post all day.... So sorry if I've wasted your time.
I would like to ask, though: What do you mean by setting the labels to a fixed position?
What worked for me was removing BOTH the reference scale AND the scale dependency. I was building this annotation to eventually create a contours map service which would eventually become a LYR file for users here.... perhaps I can set some scale dependencies there, I'll have to find a little time to evaluate it.