I resolved this issue. This had something to do with BlueHosts rules about sending SMTS notifications through Gmail (that I have through Google Apps for business). Once I turned these settings off, the form worked but I was then getting notifications from some obscure Bluehost email box.
What seems to be working is this and I think this is specific to Bluehost and Gmail because if you do this with another host, they may redirect all of your email through their hosting, so be careful.
In Gmail, I created an alias bookings@mydomain.com. In bluehost, I created a the same email bookings@mydomain.com. Simple and it seems to be working. I still have SMTS settings off in my main machform settings and have notifications turned on with the notification emails set as FROM: bookings@mydomain.com and reply to address as my main gmail address.
I still can't figure out why this setting would affect my form progressing to a payment page but after weeks of fiddling and whittling down the problem, this is what I discovered.