Sorry for posting again, but I am making progress.
I have now found that the problem is actually not exchange server sync but locking the device with a password (Start/Settings/Lock). I thought is was the exchange server, because our server requires the use of a password.
I did another hard reset and did not configure exchange. The only thing I did was lock the device with a password and tried making a phone call. Bingo. Locking up.
If the password is removed, it is back to normal.
Now that I know the issue, I will open another thread with a better topic.
If any admins see this, please feel free to delete my journey of discovery.
Devices: Samsung Galaxy Note, ASUS Transformer with Keyboard Dock