So the final configuration setting that got the upload working, was to add the domain user to the Web share of the directory on the "other" server with Full Control. So this would be Step 2e. to the list above.
As for Adam's quick reply. First, THANKS !!!! Secondly, if you follow the steps in 2. above and by binding the Identity of the AppPool to the domain user, you do not to add the identity impersonate to the web.config. The reason is because the website bound to the AppPool is running under the domain user. You can verify this by looking at System.Security.Principal.WindowsIdentity.GetCurrent(). You will see that is it the domain user and not ASP service account.