Here's what I've ended up with.

I went back to my web service solution and added a new web service item to it. When I was creating the web service, I unchecked the option that says "Place code in separate file". Soooo all my code is stored in the asmx file. In my \ws\ dir i place my asmx file into a sub folder and my classes in the app_code folder in the root directory. And everything works. Though I'm not sure i even need the sub directory now.

I don't know if I'm entirely happy with it but unless there is a reason not to do it or until i can figure out why my code behind is getting split off like it was; I guess I'll have to settle.

I appreciate the help.