> Any suggestions would be appreciated...Thanks 

What is the output you get from this command:

  ls -lL /dev/ptmx

?

Check the release notes and see what the bugs are before you "pkg image-update" 
to a bleeding edge unstable / development build:

http://mail.opensolaris.org/pipermail/indiana-discuss/2009-December/017260.html

In particular I think your problem might have something to do with this bug 
(something about the permissions on "/dev/ptmx" being screwed up and "pfexec 
chmod a+rw /dev/ptmx" fixing it (see links below):

http://opensolaris.org/jive/thread.jspa?messageID=445126

http://opensolaris.org/jive/thread.jspa?messageID=437064

http://defect.opensolaris.org/bz/show_bug.cgi?id=12380

http://defect.opensolaris.org/bz/show_bug.cgi?id=13300

http://defect.opensolaris.org/bz/show_bug.cgi?id=12527

Yeah.... I hate the X-windows bugs in build 130 too (see links):

http://www.opensolaris.org/jive/thread.jspa?threadID=120664&tstart=75

http://www.opensolaris.org/jive/thread.jspa?threadID=120685&tstart=75

If you noodle around with build  130 for a bit and still can't get everything 
working in a way that satisfies you, then I recommend that you use the "beadm" 
command to roll back to the ZFS snapshot of your old 2009.06 boot environment 
until snv_131 comes out. But before you do that, try the chmod /dev/ptmx thing 
and see if it works.
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