Thanks to everybody who worked on this solution, it's great to have a community to come to for answers. I have however come across an interesting scenario with my workflow and using the Terminal fix. I would be interest to see if other users can replicate this as well.
After applying the Terminal command, and restarting the open clamshell works as described. But I have found that because Mac OSX "thinks" the lid is closed it shuts off my microphone and will not allow me to audio chat, even with the lid open and the screen off. This creates a secondary effect that I cannot initiate a single screen screenshare because iChat says the audio is not available.
If I put the MBP to sleep and wake up with both monitors turned on, the audio and screenshare work perfectly. Of course, anyone that has tried to screenshare with dual monitors knows it is impossible to see as you get two small screens on one monitor on the other end of the chat. It's also useless to initiate an audio chat with the clamshell closed because the reverberation off the screen causes feedback into mic.
The only workaround I have been able to achieve is to set Lion back to it's original state, open the clamshell with both monitors turned on, initiate an audio chat, then use the magnet trick to shut off the internal screen, and then initiate a screenshare after that. Phew!
So if Apple doesn't think there is an issue with the default Lion settings with external screens, they should, as they have rendered one of their own applications useless under normal circumstances.
I would like to see if other users on this forum can replicate the same scenario.
Thanks.