OK, I found a solution for this although I'm not sure why I need to do it. I'm listing my solution here in case someone else runs into this problem too. I ran dxdiag and verified I have Direct X 9.0c. For some reason I have to open MED and select File->Preferences->Video Out and then click the blank button next to the video out text box. At this point I had to uncheck Gxl2BasDx9B and check Gxl2BasDx9a for both the 2-d and 3-d GXL Object. After doing this and clicking OK the grid lines appeared and I could create objects just fine.