"Why does NASA seem so paralyzed about this problem with the Canada Arm?"

Because without a fully functional arm further US construction comes to a screeching halt. If the arm hangs up while the airlock module is in between the orbiter and the station, the airlock can be damaged due to a lack of heaters. It could even pose a danger to future shuttle dockings if it fails in the wrong position.

"It seems they are afraid to proceed with anything until they are 100% on this thing. It works on the primary system, and the redundant now seems to be working too."

They're trying to minimize the risk to a very expensive piece of hardware. They're trying to avoid squandering your tax dollars by using caution, not a devil-may-care attitude. We're dealing with virtually irreplaceable assets here.

"Sure doesn't seem like the old NASA that went to the moon."

The old NASA could throw tons of money at a problem; the present NASA doesn't have that luxury. I also think you overestimate the risks NASA allegedly took during Apollo. They relied very heavily on fully functional redundancy. Loss of redundancy threatened to end a few Apollo missions before they could attain their goals.

There was also a large amount of internal discussion regarding the risk of losing a crew as lunar exploration continued. Some in the higher levels of NASA management - even in the White House - would have been very happy to end the missions right after the Apollo 11 success, because they feared the loss of a crew and what it would mean to NASA's future and to the prestige of the US.

NASA was not the bold explorer you seem to think it was.

-Kim-
http://www.geocities.com/kimekeller