After countless hours of trial/error - I got lucky(?) by way of reinstalling older version of xcpuscalar..and BT stereo now works with everything, including audio books.
It doesn't make any sense to me, but I don't really care. Even when I reboot the xcpuscalar stays active in the Task Manager and the audio comes through. This is the trial version of xcpuscalar 2005 ver 2.03. It's a quick download, worth a shot before taking drastic measures! No need to make any changes on it, just installing it did the trick!
Headset BT activation attempts to open dial pad each time though... but no big deal to me, the audio gateway remains open after closing the phone app.
(rom version: Colonel 3.3 with twist 2/13/07)