According to you, in your first post, you received this warning:
What am I missing?
Jesus did you even read what he wrote? Here. Never got that message since I didn't DELETE mobile me, I just didn't continue my free trial. See below:
So anyway, the real issue isn't even that you didn't read the documentation, it's that you didn't even read the warnings provided to you when you were disabling sync or removing MobileMe, because you assumed your way of "Sync" was correct and ignored the words "Keep on My iPhone or iPod touch / Delete from My iPhone or iPod touch"
At no point did I have the option to keep it on my IPhone.