I have narrowed this down even further:
It happens if the client computer has run the Xerox 2.94.1 print driver update that was supplied by Apple. AND it only happens when trying to print via a 64bit application. Textedit and Mac Mail fail, BUT printing out of Google Chrome works just fine. Looks like its an Apple screw up. But I don't know where to begin.
If you have a box that's still under warranty or under AppleCare, call Apple Support.
You might try using the generic CUPS drivers path (if that's available), and see if that works.
This Xerox discussion might be related/useful.
No warranty ufortunately. And since you posted that link, I have switched to using the Windows Server generic PPD for the printers and that actually seems to work. Its not a 100% fix as doesn't give ALL the printing options but it seems "good enough" for now. Xerox has been supremely unhelpful so far. Thanks for your suggestion.