Just an update here.
We wiped everything and reinstalled to 8.0.6 level.
At first we could still not launch as the standard user. We deleted.eclipse in the home directory and workspace folder that gets created when you launch the console and that allowed us to launch 8.0.6 Console as a standard user. At this point everything was working as we expected.
Next we applied the 126.96.36.199 hotfix, it acted the same as before (shown in the log portion above) with all of the cannot change permissions messages.
After the hotfix application we cannot launch the console as a standard user anymore. It still works fine as root, but not as the standard user.
We determined the issue is with the Hotfix files from the BMC EPD for Solaris RCP. 7.0 and 7.4.
7.0 does not even run because there is an error in the execution script. We were able to bypass the problem by extracting the contents of the file and seperating it from the script..... correcting the mistakes in the script and recompiling it.
The real problem is that the permissions get changed during the patching process and do not get changed back afterwards. We noticed some missing execute permissions by capturing the permissions from the base 8.0.6 RCP install and then capturing them after the Hotfix application and comparing the two.
After we fixed the permissions everything works fine and as it should.
I am opening a ticket with BMC to fix the 7.0 script and correct the permissions problems in the 7.0 and 7.4
And.... in case anyone is interested.... the 7.4 patch includes everything from the 7.0 so you should have no problems applying 7.4 directly to a 8.0.6 RCP client installation.