After taking my ipad to a 'Genius' with no result, I had to resort to a more advanced solution that I found online.
Unfortunately, it involves jailbreaking the ipad and accessing the filesystem by SSH.
Overall it wasn't too bad an experience. Though, my attitude was that I was going to end up 'bricking' my device. Happily, I did not.
So....after doing the 'fix. It looks like it is working...
Take it with a grain of salt, but here are the info I found...
"What finally worked was ssh'ing into the iphone and deleting a file. Go to /var/mobile/Library/MobileInstallation. In that folder there should be a file called 'ArchivedApplications.plist' To be on the safe side you can rename that file to 'ArchivedApllications.plist.bak' instead of deleting it.
Now when i right click on my iphone name on itunes on the pc and i click transfer purchases they actually were transferred over."
The instructions aren't detailed, so do your research on HOW to do the following:
-Enable SSH on your device
-Access your device by SSH via a Terminal program
-Finding the file
-Renaming the file
Again, this involved jailbreaking the device and this might be too advanced for a casual user.
I plan to un-jailbreak it as soon as all the applications move over.