Dan, I tried your suggestion on my test server. I downloaded DNN 5 again, and copied the release.config to my staging server. I uninstalled active directory extension first, then replaced the web.config. I then used "Beyond Compare" and copied over only the file differences that were essential, as you suggested.
I did notice that there were a lot of added entries, looks like most of it was added by Visual Studio 2008 (making it 3.5 compatible).
To start testing, I setup AD the same as live, and then I logged out. Immediately I saw a change. On the live server, when I log out, I'm taken to the homepage. On the test server though, I'm taken to the login page after logging out.
Another note, I'm not sure what the intended behavior is. If I log out, and restart the browser, shouldn't I be automatically logged in? Why is it that on the live server I see the homepage, and the test server the login page, but neither of them log me in automatically after logging out? Is this by design?
Also, if you can explain if the discrepency means that the fixed on my test server worked, or if it's irrelevant, I'd appreciate the counsel.