I rebooted & ran disk utility and found no errors. I reinstalled LW and it still wouldn't connect. I rebooted again to Classic OS 9.2 and ran LW 4.0.7 and lo & behold, it connected fine!

I'm going to go back to OS X in a bit to see if 4.0.8 will run under it now. The computer does have a problem with its clock and when I use the apple server under OSX to set the time, it sets it to 1936. Maybe that's causing a problem somewhere.

A bit of a pain to have to run 9.2, but at least LW is working right!