hi lisa, thanks for reply. I really appreciate you taking time to investigate!
you reproduced my scenario exactly, with out of box ArcGIS 10 Desktop ArcInfo, no 3rd-party tools at all, except that my FC is polygons whereas you tested points and lines, and my FC is not in a dataset. In case it matters, our SDE datatype is SDE-BINARY, high precision. since I found another successful path using the ArcGIS 9 editing model, I am willing to chalk it up to local ArcSDE gremlins and move on.
MC