Yea. Sometimes you just have the Eureka moment.

So Update on the case:
Phase 1:
Finished Downloading Win 7 SP1 x64 Pro. Made a bootable USB. Did an in-place upgrade/repair install. Reinstalled drivers and after this point, remoting in from the LAN was possible. Then got all the programs and updates. Although we were able to use remote desktop locally, we were unable to use it remotely since it wasn't in the list.

Phase 2:
Needed to add the user for remote access using the SBS Essentials Dashboard/Console. Only took a few clicks to add the computer for this user who was a non-admin. But after logging into the remote site, we were still unable to connect to the Remote Computer. The error stated that the computer could not be found. And as Bert always says, it's an issue with DNS. DNS was working fine from the LAN but since the RD Gateway resides on the server, decided to do an NSLookup on the server.

Phase 3:
The DNS server IP was set to something else other than the IP of the server itself. On a domain controller, you always want to point to the IP of the DNS Server (very often the server itself). You can use the localhost ip of 127.0.0.1 too. I think it's best practices to have that as the alternate. So after setting the new DNS server to the server itself and flushing the DNS Resolve cache (ipconfig /flushdns). The server was able to successfully to resolve the FQDN of the PC to its appropriate IP. After that, we were able to successfully remote in using the Remote Web Access site.

That concludes the story. So it was a double issue of corrupted Windows files on the client PC in addition to DNS and console configuration issues on the server. Good luck to anyone else who experiences this issue in the future.