Figured it out. Here's how to duplicate it:

Create a Project with 2 forms - Form1 and Form2
Form1
Init() - HIDE WINDOW SCREEN
Destroy() - SHOW WINDOW SCREEN
BorderStyle - 2 Fixed Dialog
ShowWindow - 2 As Top Level
WindowType - 0 Modeless
CommandButton -
CLick() -
HIDE WINDOW form1
DO FORM form2
SHOW WINDOW form1

Form2
BorderStyle - 2 Fixed Dialog
Desktop - .T.
ShowWindow - 1 In Top Level
WindowType - 1 Modal

Build the App and run it. Form2 will NOT behave like a modal form. If you remove the "HIDE WINDOW form1" from before the "DO FORM form2" in the Click() it WILL behave like a modal form. Go figure. Thanks for your help, the suggestion to build a simple app is what helped me find the problem. I can work with this, although I would rather hide the first screen.

Shane