Bruce,
You nailed the problem with the prescaler, set it and don't change it half ways through. A simple code change and it all now works great! My next step is to try your 2nd code example using Darrel Taylors' instant interrupts, I haven't had a need to try them yet, but they look very useful and reasonably easy to use for this application.
Thanks to ALL for your help and suggestions on my problem, I continue to learn many things from this great forum of users.
Cheers,
Terry