I should have held off on posting this question. I have worked through and found the problem and solved it.

VS.Net does not fully trust network locations. In my case, my code and binary were being stored to a mapped network drive, so when I went to execute the binary, it would fail when it tried to initialize my first SQLDMO object. Solution for this: move the code to a local (C:\, etc) drive.

Solution number 2 (I like this one much better):

Goto Start|Settings|Control Panel|Administrative Tools|Microsoft .NET Framework (or 1.1) Configuration

1. Open Runtime Security Policy | Machine | Code Groups | All_Code. Right click on Local Intranet Zone and choose New.
2. Name your Group and hit Next
3. Select Zone from the condition drop down. Choose Local Intranet for the Zone and hit Next.
4. Use Existing Permission Set should be selected and choose “FullTrust”.  Hit Next.
5. Click Finish

This should get you set up so that VS.Net will trust your code stored on network storage.