Well...I setup an online sandbox using a subdomain so that nothing else was included but the minimal files, and it works just fine. Go figure.
The date in the database is highlighted in the update form's datepicker just as it should be.
So now, I know it has to be a conflict with something in my newer applications. Maybe some of my custom JQuery or CSS. Not sure yet but I will let you know once I figure it out.
The funny thing is I stripped out all my CSS and JQuery to test for this before posting this issue but I must have overlooked something. I am going to add to this clean setup, little by little until it breaks the datepicker. Once I find the culprit, I will go back to my other applications and see if that fixes the problem.
Also please see private message.