Here's some additional information----I went to the Genius bar at the local Apple store. With one exception, none of the genius staff had ever heard of the "self-assigned" IP address problem. They tried all the things/fixes/stabs in the dark that I'd already tried and then one of them noticed that my MacBook doesn't have an "administrator" account. He thought that this was very weird and told me he was surprised that the machine had functioned so well for over four years without having this user account. I told him that it was always this way---he said in all of his experience (limited?) this was impossible------I said, no its true (funny, there are other posts in the support communmity of having no admin account on a macbook---so I'm not alone here).
So, he said that there are two ways to create one. One is to wipe the HD clean and reinstall the OS and everything else (EEK, no thanks!) and then create a true admin account, and the other is to create one in the accounts area. We did the second one, and he said it wasn't a "real" admin account because it had "standard" staus. Whatever that means.
But the funny thing was that this solved the problem---I still have no Airport (it has the useless self-assigned IP), but the Ethernet connection is now back to normal, and when I came home, plugged in the Ethernet, my MacBook immediately recognized my home network and off I went into full, normal internet use.
At the genius bar, they have absolutley no idea why this worked. Me neither.