Okay, it was an interesting journey; here is the skinny:
The error was caused by a missing mpeg2 component in Quicktime. The timeline looked okay (no unrendered clips) but when compressor hit the mpeg element it failed causing the error. Also note worthy is that adding the missing mpeg2 component to Quicktime causes FCP (at least versions 4.x) to pause, as if it is not responding, before finally opening. I purchased a new mpeg2 component from Apple but it was still the old (Quicktime 6.4 vintage) version rather than one that has been updated for Quicktime 7.
jmf