Well, I remembered that I had not upgraded another computer to a newer version of inkscape, so I tried there (Inkscape-0.44-1.win32.exe). It's also XP Professional SP2.
For text on path - worked fine and I realized that the problem was operator error on the newer version... ;-( Sorry. I was attempting to put "flowed text" into a path. That doesn't work.
Trace bitmap - worked fine. Here is what I noticed: When I import a bitmap (jpg, png, bmp) into the 0.44-1 version on that computer it says in the status bar "image". Actually, one image that I used, and it traced it anyway, it said... "image with bad reference."
On my computer rather than seeing the image import as an image, it sees it as a "rectangle".
I attempted to uninstall inkscape and install the version that was on the other computer, but I get the same "rectangle" import. Very strange. SO, definetely an environment problem. But, I have no idea what.
Anybody?
THANKS.
Maia