Is it not possible to change the category an item belongs to? Seems like once I make an item the option to change categories is gone. Does not seem right - must be missing something?????

Yes you can - I see that now. I apparently in my mindless glee of trying all the options and ignoring what category inherits what from who, broke the structure. Deleted my first test categories and put some new ones in and is working again. Quite a bit to learn here I now realize, before committing my whole site to it. Ahhhhhhhh - learning curves - hate them!!!