agraham,
It seems that you have taken up the bitblt challenge!
Find below the site I use for code snippets, it has another article on bitblt
which may solve the problem you are finding!
CodeProject: Using BitBlt to Copy and Paste graphics. Free source code and programming help
This link has the code example and a demo project, the code is related to my
earlier post.
If you have a problem let me know.
Regards,
Andrew.