Alright so here's an update...
I bought a brand new VW Phatbox off of ebay, used the same cables I had already tried with the Kenwood Music Keg, same DMS cartridges... and.... IT WORKS!!!
So now I'm confused. I thought the only difference between the Kenwood Music Keg and the Phatbox was firmware. According to my logs before... the VW firmware flashed onto the Keg completed just fine. So what could possibly be the reason for the Music Keg flashed with VW firmware not being able to get the "turn on" signal from my VW Headunit?
Just as a background, I believe my Kenwood Music Keg KHD-CX910 is one of the very early ones sold with a 10GB DMS cartridge instead of the later ones that were sold with 20GB DMS cartridges. Is there anything besides firmware that is different about these?