Yea, the 1.6.7 did the trick for SQL 2008.  One other issue though.  Once the Business Object Mapper (BOM) is open, it seems to be using a connection string stored in a table DTEProjects.proj_connectionstring instead of the connection selected in the "Application Database Connections" dialog.  This was causing the BOM to point back to the other server when configuring a new BO.  Is there a better way of changing this besides editing the table.

There are several places that a connection string can be specified...all accessible through the designers. You can set the connection string in the data store (like you are aware). Second place is to open the BO Mapper properties (configure). There are connection strings that can be specified on a per project basis (DTEProjects). The third place is on the BO itself, which would just entail right clicking the BO and going into properties.