MS sent an update and rebooted the computer automatically. When I came back, tasks are running, but BOINC stays in local host mode. Both boinc.exe and boincmgr.exe are exceptions to firewall, but I disabled firewall also - no change. I also stopped the boincmgr and restarted it, no change.
The message log since I rebooted:

6/12/2010 11:17:10 AM Starting BOINC client version 6.10.56 for windows_intelx86
6/12/2010 11:17:10 AM log flags: file_xfer, sched_ops, task
6/12/2010 11:17:10 AM Libraries: libcurl/7.19.7 OpenSSL/0.9.8l zlib/1.2.3
6/12/2010 11:17:10 AM Data directory: C:\Documents and Settings\All Users\Application Data\BOINC
6/12/2010 11:17:10 AM Running under account HP_Administrator
6/12/2010 11:17:13 AM Processor: 2 AuthenticAMD AMD Athlon(tm) 64 X2 Dual Core Processor 4200+ [Family 15 Model 75 Stepping 2]
6/12/2010 11:17:13 AM Processor: 512.00 KB cache
6/12/2010 11:17:13 AM Processor features: fpu vme de pse tsc msr pae mce cx8 apic sep mtrr pge mca cmov pat pse36 clflush mmx fxsr sse sse2 htt pni cx16 syscall nx lm svm rdtscp 3dnowext 3dnow
6/12/2010 11:17:13 AM OS: Microsoft Windows XP: Professional x86 Edition, Service Pack 3, (05.01.2600.00)
6/12/2010 11:17:13 AM Memory: 1.94 GB physical, 3.78 GB virtual
6/12/2010 11:17:13 AM Disk: 224.07 GB total, 190.68 GB free
6/12/2010 11:17:13 AM Local time is UTC -4 hours
6/12/2010 11:17:13 AM No usable GPUs found
6/12/2010 11:17:15 AM World Community Grid URL http://www.worldcommunitygrid.org/; Computer ID 1262720; resource share 100
6/12/2010 11:17:15 AM World Community Grid General prefs: from World Community Grid (last modified 31-Dec-1969 19:00:01)
6/12/2010 11:17:16 AM World Community Grid Host location: none
6/12/2010 11:17:16 AM World Community Grid General prefs: using your defaults
6/12/2010 11:17:16 AM Reading preferences override file
6/12/2010 11:17:16 AM Preferences:
6/12/2010 11:17:16 AM max memory usage when active: 991.24MB
6/12/2010 11:17:16 AM max memory usage when idle: 1784.23MB
6/12/2010 11:17:25 AM max disk usage: 10.00GB
6/12/2010 11:17:25 AM don't use GPU while active
6/12/2010 11:17:25 AM max download rate: 1024000 bytes/sec
6/12/2010 11:17:25 AM max upload rate: 102400 bytes/sec
6/12/2010 11:17:25 AM (to change preferences, visit the web site of an attached project, or select Preferences in the Manager)
6/12/2010 11:17:25 AM Not using a proxy
6/12/2010 11:17:25 AM Suspending computation - initial delay
6/12/2010 11:19:10 AM World Community Grid Restarting task faah14479_ZINC00781745_xEN_2nd_md00020_00_0 using faah version 607
6/12/2010 11:19:10 AM World Community Grid Restarting task nl961_00089_6 using hpf2 version 617
6/12/2010 11:19:15 AM World Community Grid General prefs: from World Community Grid (last modified 31-Dec-1969 19:00:01)
6/12/2010 11:19:15 AM World Community Grid Host location: none
6/12/2010 11:19:15 AM World Community Grid General prefs: using your defaults
6/12/2010 11:19:15 AM Reading preferences override file
6/12/2010 11:19:15 AM Preferences:
6/12/2010 11:19:15 AM max memory usage when active: 991.24MB
6/12/2010 11:19:15 AM max memory usage when idle: 1784.23MB
6/12/2010 11:19:15 AM max disk usage: 10.00GB
6/12/2010 11:19:15 AM don't use GPU while active
6/12/2010 11:19:15 AM max download rate: 1024000 bytes/sec
6/12/2010 11:19:15 AM max upload rate: 102400 bytes/sec
6/12/2010 11:19:15 AM (to change preferences, visit the web site of an attached project, or select Preferences in the Manager)
6/12/2010 11:21:19 AM Not using a proxy

Any ideas of what is going on? Prior connection issues have been due to firewall, but I don't think so now.