SOLVED: I'M SUCH A PERFECTIONIST: I added hyphens in my default SMS callback number as opposed to having the 10 digit phone number displayed on the recipient's phone all bunched together. Well - that was enough to render the HTC SMS client dysfunctional. I reset to factory settings & problem is now solved. I'm pretty sure I can do threaded SMS even to non-Verizon customers with the native app without having to resort to Handcent.