I will definitely try some of these things...i was more trying to follow this book and trying to figure out why my results were different.
Its steps are
1. Use CV Curves Tool with setting of 3-Cubic
2. Starting in the left-bottom corner of an existing wall we use the CV curves tool snapping to vertices to draw the left, top, right and bottom (including making the archways shown in my screenshots)...when done drawing the wall with arches use Edit Curves-Open/Close curves to close the curve (one thing to mention here is the book has us click three times in every corner to give a "crisp" corner and only once when making the top point in the arches).
3. Once the wall is done move and snap it to the middle placeholder wall (seen in screenshot 1).
4. Now duplicate your archway wall and snap-move it to other side of placeholder wall.
5. you can now delete the placeholder wall (leaving the two duplicated archway walls)
6. Select both archway walls and use Surfaces-Loft(option)...reset to defaults and LOFT.

At this point according to the book the loft should have produced what was missing between the two walls (all around just the edge).

But with screenshot 3 you can see that i'm just getting another wall that is kicked out to one of my outer walls.

Maybe putting down my steps someone can see where i've made my newbie mistake. hopefully.
Thanks for all the things to try undseth...by the way i followed your mental ray thread...nice work!