HBITMAP hbm;
BITMAP bm;
DDSURFACEDESC ddsd;
IDirectDrawSurface *pdds;
HRESULT err;

hbm = (HBITMAP)LoadImage(
NULL, filename, IMAGE_BITMAP, 0, 0,
LR_LOADFROMFILE|LR_CREATEDIBSECTION);

if (hbm == NULL)
return NULL;

//
// Get the size of the bitmap.
//
GetObject(hbm, sizeof(bm), &bm);

//
// Now, return to DirectX function calls.
// Create a DirectDrawSurface for this bitmap.
//
ZeroMemory(&ddsd, sizeof(ddsd));
ddsd.dwSize = sizeof(ddsd);
ddsd.dwFlags = DDSD_CAPS | DDSD_HEIGHT |DDSD_WIDTH;
ddsd.ddsCaps.dwCaps = DDSCAPS_OFFSCREENPLAIN;
ddsd.dwWidth = bm.bmWidth;
ddsd.dwHeight = bm.bmHeight;

err = g->pDD->CreateSurface(&ddsd, &pdds, NULL);
if (FAILED(err))
{
g->TraceErrorDD(err);
TRACE(tracef," Creating surface\n");
return NULL;
}

err = g->DDCopyBitmap(pdds, hbm, 0, 0);
if(FAILED(err))
{
g->TraceErrorDD(err);
TRACE(tracef," On DDCopyBitmap\n");
return NULL;
}

DeleteObject(hbm);

return pdds;

Setting up DirectDraw Device:

// Set the "cooperative level" so we can use full-screen mode
hr = pDD->SetCooperativeLevel(ddWnd,
DDSCL_EXCLUSIVE | DDSCL_FULLSCREEN); // | DDSCL_NOWINDOWCHANGES
if (FAILED(hr)) {
TRACE(tracef,"Error setting Exclusive,Fullscreen mode\n");
pDD->Release();
return FALSE;
}
// Set 640x480x256 full-screen mode
hr = pDD->SetDisplayMode(640, 480, 8);
if (FAILED(hr)) {
TRACE(tracef,"Error setting display mode: %d\n", int(LOWORD(hr)));
pDD->Release();
return FALSE;
}

oh, and:

DDSURFACEDESC ddsd; // A structure to describe the surface we want
DDSCAPS ddscaps; // ??
HRESULT hr; // Holds return values for function calls
DDCOLORKEY ck;

memset(&ddsd, 0, sizeof(ddsd));
ddsd.dwSize = sizeof(ddsd);

ddsd.dwFlags = DDSD_CAPS | DDSD_BACKBUFFERCOUNT;
ddsd.ddsCaps.dwCaps = DDSCAPS_PRIMARYSURFACE | DDSCAPS_FLIP |
DDSCAPS_COMPLEX;
ddsd.dwBackBufferCount = 1;

hr = pDD->CreateSurface(&ddsd, &pDDSPrimary, NULL);
if (FAILED(hr))
{
TRACE(tracef,"Error: pDD->CreateSurface (primary)\n");
TraceErrorDD(hr);
pDD->Release();
pDD = NULL;
return 1;
}

ddscaps.dwCaps = DDSCAPS_BACKBUFFER;
hr = pDDSPrimary->GetAttachedSurface(&ddscaps, &pDDSBack);

if (FAILED(hr)) {
TRACE(tracef,"Error: CreateSurface (back)\n");
TraceErrorDD(hr);
return 2;
}

ck.dwColorSpaceLowValue = RGB(0,0,0);
ck.dwColorSpaceHighValue = RGB(0,0,0);
pDDSPrimary->SetColorKey(DDCKEY_SRCBLT,&ck);

// success
return 0;

Ok, and the Blt setup and call:
NOTE: Check Surfaces Restores all lost surfaces.
menutl is the surface returned by the first call.

// RECT src;
HRESULT err;

CheckSurfaces();

// SetRect(&src,0,0,15,31);

err = g->pDDSBack->BltFast(100,50,menutl,NULL,
DDBLTFAST_NOCOLORKEY | DDBLTFAST_WAIT);
if(FAILED(err))
{
g->TraceErrorDD(err);
TRACE(tracef," Blitting menutl\n");
}

NOTE: No Errors show up in my TRACE log file (and I know the TRACE works, because my comments show up.)

Also: Everything else works but the blt from the other surface (any of them). IE: I can draw text on screen, and fill the background to any color I want.

Wow is that ever a long post. Thanks in advance for all your help.