Hi Paul -
Well I finally chatted w/ someone at apple and was able to resolve it. First I am going to tell you what they told me, then I am going to tell you what I would do different.
I already had iOS5 loaded
They had me go to Settings>General>Reset>Erase all content and settings
After I did all that it still wouldn't accept the login/password.
That is when we discovered that I hadn't set the iphone right to back up to the cloud so there was nothing there for it to open.
Next they had me back up my iPhone to the cloud. (that took about an hour). Once it was done I went back to the iPad, you have to put some stuff in like country, blah blah blah, you are looking for the back up to iCloud, computer or iTunes. Select iCloud and from there it took about 5 minutes and everything was up and running.
What I would do differently - I would not reset the iPad. I didn't loose anything I can't replace but my pad desktop is a mess and I have to fix all that again. I would do the iPhone back up and then once that was done try to log into the iCloud again using the settings>iCloud. If that didn't work I would do the steps above because it did work.
Back up on iPhone: Settings>iCloud>Storage and Backup>Backup Now.
Good Luck!
Wendy
Macbook Pro
iPad 2 iOS5
iPhone 4 iOS5