Adam,
Hi. Thanks for posting. It is obvious from your post that you know what you are doing, maybe more so than anyone on here. Therefore, it is a bit surprising that you come to the conclusions that you do. While SQL 2005 Express isn't SQL 2008 or Oracle, it is more than enough to handle seven clients and a few others. I may also be completely mistaken (probably am), but I am not sure how compatible it is with 2008.
I think there are always a few of us who for whatever reason have issues in the beginning with AC and SQL. It's usually connectivity. I don't know why you are having these issues. I am sure firewalls aren't an issue, although DNS and other things could be a problem.
I can see that your setup is way, way more than anyone would ever need with AC. From reading the board, you will see that there is no one who likes Client/Server better than I, but truth be known, it will run on Windows 98 on a 512Mb peer to peer. Maybe not blazing speed, and I wouldn't run the database on that, but you get what I mean.
In answer to web-based, it will never go web-based. Jon has made that pretty clear. There are ASP web-based models and there are local application models. One doesn't usually migrate to the other. Usually. As far as MySQL, I don't think Jon is moving in that direction either. Some people talk about web-based as if everyone is having these issues. I think it is the small minority. Of course, if you are one of those, it is tough. This may be a dumb question, but have you talked with support? I know they can't always fix the question, but they will stay with you until they do or at least try to.
As a user from the get go and Access, I have been lucky with the SQL version, but it has been a growing pain for some. I don't have the time to look now, but there was one group having issues that recently changed to SQL 2005, but I don't know the outcome.
Do you have any IT people there or someone who specializes in SQL or a DBA?
