Thanks for your help and responses guys.
Domenico, that bug synopsis seems to state the same problem I'm having. Too bad it's resolved in 10.2; we just upgraded to 10.1. 😞
However, let me explain a bit further:
With the setup I initially posted in this thread, users of "User" type are the only ones that cannot see services. "Administrator" or "Publisher" type users from a SQL Identity store can see. However, when I revert back to arcgis server built-in security, the user type can see services as expected.
Again, thanks Bubba and Domenico for your help and responses. Let me know if you have any questions or if my additional details spawn any other questions/comments.
jerry