Hi Dude:
Thanks so much for replying to my questions.
Yep, looks like a pure bug But what I ended up doing was going back to the Battle Tower, then use a teleporter and worked my way back into Broken Valley. That worked OK, so I'm off and running.
Just for the hell of it, I reused the initial save I made before fighting ba'al and did it 3 times, but same results with each one. Used the teleporter at the North end when exiting the cave. Couldn't fly, etc.
I'm at level 33. The fights are getting easier

Thanks Dude and maybe we'll cross paths again.