The error message states to use SFTP instead of SCP, but when I first connected to my remote host, I definitely selected the default option, which is SFTP.
Is it somewhere ELSE that I should select "SFTP" or was it refering to when I connect initially?
That probably means WinSCP failed to negotiate SFTP protocol and fell back to SCP. It does not seem that WinSCP can communicate with your server in any way.
Please attach a full log file showing the problem (using the latest version of WinSCP).
To generate log file, enable logging, log in to your server and do the operation and only the operation that causes the error. Submit the log with your post as an attachment. Note that passwords and passphrases not stored in the log. You may want to remove other data you consider sensitive though, such as host names, IP addresses, account names or file names (unless they are relevant to the problem). If you do not want to post the log publicly, you can mark the attachment as private.