Hello Droid X Friends-
As I mentioned earlier, through testing with my fiance's phone and her account, I believed the problem had to do with the Facebook account itself, not the phone and not the application on the phone. I was correct!
If you're like me, you disabled every possible thing in the privacy settings of your Facebook account. As it turns out, this prevents Facebook from sharing information with 3rd party apps, and as a result, you get the "Internal Sever Error" when you try to fix it. The solution takes about 30 seconds and is extremely simple.
On Facebook:
Go to Account->Privacy
Under Applications and Websites click 'Edit your settings'
Click 'Turn on' all platform applications
I don't know the wider security implication of opening the privacy settings up on your account...seems a lot like opening up your fly to the world. But it fixed the problem I was having with Facebook immediately. I hope this post saves some new Droid X users dozens of hours of troubleshooting!
This is definitely helpful but not complete. You have to turn on applications for them to work. But if there are apps you dont want running you can just delete them from the application settings section.
I had one conflict with Facebook for Blackberry. Once I deleted that one it worked fine.