Lawrence,
Thanks for the reply. In my case it turned out that trashing the all preference files with the name ‘compressor’ in them fixed the issue (there were three of them). As soon as I did that, I was able to set up the Quickcluster and it worked fine. I had previously tried the Qmaster repair program, reinstalled Lion, , reinstalled Compressor 4, and trashed the Qmaster and Compressor folders in the Application Support folder. None of these steps solved what trashing those preference files did.
And by unchecking the “Include unmanaged services from other computers” button, the prompts for my admin password stopped.
So I must say, this particular phone call to Apple Support was a good one–it just took five tries to get to someone who was smart enough to figure it out.
Hope this maybe helps someone else!
compressor preference files are in: User/Library/Preferences. (com.apple.Compressor.plist, com.apple.Compressor.plist.lockfile, etc)