I discovered that my server did not properly have GD and FreeType properly installed. GD was there, but FreeType was not. Once I got the hosting company to enable FreeType, everything worked great with the better captcha stuff.
I was able to verify my server's config by uploading a simple php file. For those in the same situation as I was, just create a text file and enter the following:
Save the file as something like "phpinfo.php" and copy it to the public_html directory on your host. Just call it using http: // yourserver.com/phpinfo.php.
These lines need to appear on the info screen in the GD section
FreeType Support enabled
FreeType Linkage with freetype
Hope this saves someone else some grief.