Many thanks for all of the advice! Now for the explanation of what went
wrong, how I found it.... and hopefully you guys won't take away my
engineering degree!

Using a wiring diagram from the web and my ohmmeter, I again reassured
myself that it was wired properly. The two switches in the hook switch
and three in the pulse generator all made and broke contact cleanly
(also verified with my meter).

Then what to do?! Having a small stockpile of 500 series phones
available, I pulled a handset off and connected it. This turns out was
from a newer generation 502... but we got a dial tone! It was much much
too quiet though-- which I surmise was from the speaker impedance not
matching the transformer. Finding an older 502 & connecting the handset,
IT WORKED!

Meanwhile as background, we had carefully cleaned the contacts on the
mic and speaker cartridges for the 302. I had checked the resistance of
the cartridges out-of-circuit so I knew they weren't blown. And I had
checked the wires on the phone end IN-circuit. Bad Idea. Seems I was
seeing the resistance across the transformer not the resitance across
the mic. The simple answer--- if you disconnect the microphone
cartridge, you get the same symptoms and all that was wrong was the
cartridge wasn't making clean contact with the spring contacts. Cleaning
them up and bending them out a little, it worked fine.

Thanks so much for all the suggestions, they did help us narrow down the
search and locate the problem.

Slightly embarrased,
Adam (who's usually fixing other's problems by telling them they needed
to plug it in-- seems I should take my own advice!)