I am having problems transitioning AD from Win2k3 DC to Win2k8 DC

I am transitioning from an old PDC with Windows 2003 R2 server to a newer DC with Winodows 2008 R2.  I have completed the transfer of all FSMO roles from 2k3 DC over to the 2k8 DC.  However, when I go to demote the 2K3 server I get the following:"The box indicating that this domain controller is the last controller for the domain mydomain is unchecked. However no other Active Directory controllers for that domain can be contacted."

When I use Replmon.exe utility to view the FSMO roles from the old 2k3 server all roles show are successfully transfered to the new 2k8 DC. 

However, when I run the nltest from either server I get the below results.

Can somone please help me figure out whats going wrong here?  Thanks in adance for any help you can provide.

C:\Program Files (x86)\Support Tools>nltest /dsgetdc:sdusa.local /pdc
           DC: Win2k8DC
       Address: \\192.168.168.11
     Dom Guid: 3bd23af2-27d4-4d15-834e-746d2cdaa12b
     Dom Name: SDUSA.local
  Forest Name: SDUSA.local
Dc Site Name: Default-First-Site-Name
Our Site Name: Default-First-Site-Name
        Flags: PDC GC DS LDAP KDC TIMESERV GTIMESERV WRITABLE DNS_DC DNS_DOMAIN
DNS_FOREST CLOSE_SITE 0x3000
The command completed successfully

C:\Program Files (x86)\Support Tools>nltest /dsgetdc:sdusa.local /ds
           DC: Win2k3DC
       Address: \\192.168.168.169
     Dom Guid: 3bd23af2-27d4-4d15-834e-746d2cdaa12b
     Dom Name: SDUSA.local
  Forest Name: SDUSA.local
Dc Site Name: Default-First-Site-Name
Our Site Name: Default-First-Site-Name
Flags: GC DS LDAP KDC TIMESERV WRITABLE DNS_DC DNS_DOMAIN DNS_FOREST CLO
SE_SITE
The command completed successfully

C:\Program Files (x86)\Support Tools>nltest /dsgetdc:sdusa.local /dsp
           DC: Win2k3DC
       Address: \\192.168.168.169
     Dom Guid: 3bd23af2-27d4-4d15-834e-746d2cdaa12b
     Dom Name: SDUSA.local
  Forest Name: SDUSA.local
Dc Site Name: Default-First-Site-Name
Our Site Name: Default-First-Site-Name
        Flags: GC DS LDAP KDC TIMESERV WRITABLE DNS_DC DNS_DOMAIN DNS_FOREST CLO
SE_SITE
The command completed successfully

C:\Program Files (x86)\Support Tools>nltest /dsgetdc:sdusa.local /gc
           DC: Win2k3DC
       Address: \\192.168.168.169
     Dom Guid: 3bd23af2-27d4-4d15-834e-746d2cdaa12b
     Dom Name: SDUSA.local
  Forest Name: SDUSA.local
Dc Site Name: Default-First-Site-Name
Our Site Name: Default-First-Site-Name
        Flags: GC DS LDAP KDC TIMESERV WRITABLE DNS_DC DNS_DOMAIN DNS_FOREST CLO
SE_SITE
The command completed successfully

C:\Program Files (x86)\Support Tools>nltest /dsgetdc:sdusa.local /kdc
           DC:  Win2k3DC
       Address: \\192.168.168.169
     Dom Guid: 3bd23af2-27d4-4d15-834e-746d2cdaa12b
     Dom Name: SDUSA.local
  Forest Name: SDUSA.local
Dc Site Name: Default-First-Site-Name
Our Site Name: Default-First-Site-Name
        Flags: GC DS LDAP KDC TIMESERV WRITABLE DNS_DC DNS_DOMAIN DNS_FOREST CLO
SE_SITE
The command completed successfully

I also checked the the Group Policy replication with replmon and got the below results.

Active Directory Replication Group Policy Object Output
Printed at    2/27/2013 10:42:57 AM

Below are the Group Policy Objects and their associated version numbers for the server (Win2k8DC):

Name:         Default Domain Policy
              GUID:                       {31B2F340-016D-11D2-945F-00C04FB984F9}
              GPO Version:                65539
              GPO SysVol Version:         ERROR

Name:         Default Domain Controllers Policy
              GUID:                       {6AC1786C-016F-11D2-945F-00C04fB984F9}
              GPO Version:                13
              GPO SysVol Version:         ERROR