Issue RESOLVED!
Ok first of all, thanks again for the assistance BadMouth and MrThunderwing, it's SOOOO appreciated. Outrun 2006 Coast 2 Coast may not be the best racer ever, but IMHO its one of the better PC ARCADE racers. Really loving it and playing with the wheel works very well, once issues resolved of course.
So what was the issue? Answer at the end of the post

First, let's talk about what I tried and lets keep in mind that the settings discussed are pertaining to MY system, can't speak for other PC's:
- I tried the calibration with half-press on the pedals, didn't work.
- Also I deleted the Logitech game profile and tried again from scratch. Unfortunately, as was noted above, Outrun does NOT like the option "Report Combined Pedals" as with this option on, menu selection keeps cycling from top to bottom at the "options" screen. However, although it didn't do this if I turned the option off, since many other racers DO like that option, I decided to try and use a profile again with the hope that I could at the very least just use it to turn this option off.
- Ok, so reset the profile, turn off "report combined pedals", get back into outrun 2006, calibrate the pedals (I get the typical "Slider Axis 1 for the gas and Slider Axis 2 for the brake) and they are all reversed. So... looks like I need to select "Invert Axis Polarity" on all pedals (steering is fine). So back to the %^##$ profiler, set the pedals to "invert axis polarity" and try again. REsult, gas works as it did before but can't get brake to work, which has been the biggest problem so far. So I exit the race, swear a couple of times like the good Canadian I am, get up from the seat to go to the keyboard and then I notice the wheel starts moving on its own, like when it autocalibrates at the boot up or when you plug it in.
Say what?
- Check the cables, all is good. Unplug the wheel from its current USB port, plug it into another usb port, re-enter outrun, recalibrate gas pedal and it gives me "Axis 1 Y".
Say what??
- OK, go to the brake option, calibrate and I get "Axis 2 Z"
Say what??? OK, do this is different.
- Go into a race and ... the BRAKE WORKS! And for good measure, so does the gas!
- So I try and calibrate the clutch as the brake since I feel with the need to drift, it's easier to keep both feet ready at the pedals but one I calibrate, the brake doesn't work.
- Hmm, but the brake did work when using the brake pedal so...
- Exit Outrun, go into the profiler again, ensure I'm in the outrun profile I created (I am), click on "Brake" and select "mapped to Clutch". Then I enter the clutch option and set it to "clutch mapped to "brake"
- Back into Outrun we go, into the options menu and recalibrate the brake but with the clutch pedal, enter a racer and IT WORKS!!!
pause the game, enter the options menu and press "print screen" so that I can remember on this PC what the options should be! LOL. Go back into Outrun and have a few racer and everything is working perfectly. Exit outrun and document all of this in this post so that if I ever have to re-install, at the very least I'll have a reminder right here on what I need to do!
So that's the story, the adventure is over and there's a freaking happy ending.
Now, onto the new Outrun "Cannonball" mod to see if I can get that one to work with the wheel, then onto the model 2 emulator!

Thanks again,
Happy Loaf!