Finally got it working. Did it before I read your post Stephen but thanks a lot anyway. I'm gonna try out all you said to keep learning.

I'm gonna post what I did in case more newbies like me come here with the same problem.

I reinstalled the OS into the HD with the following settings:

* Start a mail server (smail) at boot? (No)
* Start sshd at boot? (No)
* Start Samba at boot? (No)
* Start kdm at boot? (Yes)

Then I was asked for a host name and to select the network device. I had two options for the device: (eth0 and eth1) so I typed enter on eth1 and I said Yes to DHCP. I did this because I read the boot sequence and noticed that eth0 was setup together with PCMCIA drivers, so I assumed that eth1 had to be the USB ethernet device.

After booting up, I went to edit the file /etc/network/interfaces and made sure I had the line:
auto lo eth0
iface lo inet loopback
iface eth0 inet dhcp

Then /etc/init.d/networking restart to restart the network.

For some reason that someone could probably explain to me later, this worked. Why did this work with eth0 when I chose eth1 during the HD install? Maybe I'll find out some day.

Thanks for all the help Stephen !!!!!!!!!!!! You showed me where to tinker to get this working. I'm loving this.