This has been resolved. Long story short the IT department set up the instance through AWS with a MICRO site...then passed over the login info etc for GIS to finish - but ArcServer can't exist on a micro site according to the help. So when the GIS guy logged into the instance and started ArcGIS Server Manager, instead of being prompted for the username and password it prompted with the create site/join existing site dialog since the micro site was apparently not recognized, leading him to think there was no site. Then the confusion and attempts to create a site in cloudbuilder and join to this already existing instance began, thus the 'Local Server machine �??LOCALHOST�?? has not been configured' message.