Click on blank area of TaskBar & select Properties. Against Task Bar Buttons option, make sure that 'Never combine' is selected.
Thanks, but I already checked that.
I also ran the Aero Troubleshooters in case it was related to that.
Update: I started in Safe Mode and the minimize-to-taskbar worked perfectly. On a hunch, I deleted AVE's Thumbnail Sizer, which was a remnant of the previous Vista system, and rebooted. That solved the problem.