Ok, I got it to work… Here is what I did…
In the TinyMCE folder — I DELETED… ALL… “The Files!” NOT folders.
I uploaded ALL the files (NOT FOLDERS) from the WordPress 2.8 – I DOWNLOADED from the “www.ads-software.com website.”
ALL seems to work now — with the editor.
There were missing files and files that were not needed it seems.
Earlier I upgraded another blog from 2.3.1 to 2.8 – MANUALLY. All worked fine as the proper files were there – it seems.
Hope this helps you all!
The above is what fixed it for me.