I've been trying to follow your instructions, but, frankly, they're a bit esoteric to me. Unfortunately, I'm not a php code writer, which is the reason that I've been buying some WA extensions.
I'm afraid that when you say:
------1. create a record set based on the username when the form is submitted
2. update the insert server behavior to only insert if the number of rows return from the record set is 0
3. you can then use the Show IF Server Behavior in Dreamweaver to display a message if the number of rows > 0 stating that the username already exists -----
you're assuming I know more php than I really do, particularly regarding point #2.
Some clarifications would be highly appreciated.