Correct, it is using the serial port from the Mach3 on Windows XP to the Sieg 3501. I have tried changing the pin associations as you described and per the manual I have. Nothing working there yet. I have tried every combination possible for the Z axis - yes, that was time consuming! :-)
I also tried shutting down and restarting Mach3 after assignment changes, no luck there as well.
I am having a friend stop by tomorrow (Electrical Controls engineer here at work) and he will is going to confirm physical wiring is correct. I will let you know how that portion of work goes.