I think I answered my own question....
The LabX1, despite showing all 8 data lines connected to the LCD, is operating in 4 bit mode. (I can tell by the simultaneous connected LEDs flashing). Thus the DEFINE should be LCD_DBIT 4 (start with 4th bit). The default in PBP3 for LCD_bits is 4 and since this is not defined explicitly in the DEFINES in the program (above) this is what it defaults to.

Still have a question about the schematic showing 8 lines connected and when I change the DEFINEs to reflect 8 lines, the display does not work (random flashing characters).