Correct Behavior:



What I'm getting on a seperate part of the model:



Here's the .blend

It's late but I think I'm not screwing up and this is a real bug. I have the texture displaying in the 3D view and have tested it in the COL channel to be sure the UV's aren't messed up. I have subsurf turned up to 6. I am out of solutions.

For some reason you've disabled subsurfing while rendering. Activate it in your modifier and all is ok.

Thanks kAinStein! I had a feeling it would turn out to be a simple problem but for the life of me I couldn't find it last night.