I click on properties for the new audio receiver and find two choices: my d-link Ethernet card or my HomeFree Phoneline Adapter.

No you didn't. Those options aren't available on the properties for the particular receiver. They are available under Tools|IP Configuration.

I make the obvious choice of highlighting the HomeFree option, but it doesnt stick.

It's not supposed to. That dialog lists all of your network adapters and allows you to configure them individually. Just go to the HomeFree network adapter and check that 'Enable Autoconfiguration' is checked. The defaults should be OK. Make sure that 'Make music available on this adapter' is checked.

The settings for the other adapter shouldn't matter, so leave them alone.

The other problem that you might have with Windows XP is that if the network interface is not correctly configured when the ARM starts (i.e. hasn't had an address assigned yet), then you'll need to restart ARM. The manager software was written before IP addresses could change under it.

My Rio just mocks me by searching for a music server then just gives me some IP address.

It would be useful if you could actually give us the complete contents of the Rio Receiver screen.

Try running through the trouble-shooting steps listed here.

God knows sonic|blue has no intention of assisting in any way.

In an official capacity, that's probably true. However, I work for SBLU, and I'm trying to help, no? OTOH, I've got a vested interest in you getting this to work -- I wrote the ARM software.