Problem Solved!
Apparently the printer MUST be told via the attached control panel that the multi-function tray is getting envelopes. I had thought that the information was passed from the computer via the driver, since there is a choice for that when you click on printer properties when you are printing.
So... if you see this problem, go to your printer and select "paper settings" from the home screen and choose "no. 10 (COM10)" paper for the multi-function tray (first tray on my screen).
Hope this helps someone.