Here is an update in case anyone else is tracking this or having similar problems. I had a 1.5 hour long tech support call from SolarWinds yesterday on this issue. The tech had even read this discussion to see what had been tried previous to the call. That said he still walked me through the entire process all over again - uninstall and reinstall, etc. In the end the problem is still unresolved and it sounds like I'm going to be escalated to the Dev team for review.
A couple interesting things to pass along:
1. In my SWLEMreports.log file there were some strange SQL errors. The tech connected to my LEM installation as root and rebuilt the LEM hsql database. This had an immediate positive impact on the issue and the sql errors in the log went away.
2. We have Sophos Enterprise suite for anti-virus and device security. The tech was using snort to look at the network traffic between the LEM server and my workstation. It appears that Sophos was blocking or preventing network traffic even though we don't use Sophos firewall product or network management! When we disabled the Sophos client services (Control Panel \ Admin Tools\ Services) the network traffic went through to LEM. Note that Reports worked previously under version 5.7 and 6.0.1 but not under 6.1 - and our Sophos installation has not changed in that time frame. So this is something we are researching on the side.
3. That said, even when Sophos was disabled the Reports application was sporadic - sometimes it worked, sometimes it didn't. There were a lot of "this doesn't make sense" comments on the phone. I think this is the reason for the possible escalation to Dev.
4. The tech identified some memory configuration issues on our LEM appliance (Vmware) - we needed to configure the 'reserved memory' for the appliance. This probably isn't contributing to this particular issue but it's worth passing along.
All in all it was a very interesting and productive phone support session. I'll report back on what happens on the next call.