Ok, did my deep dive of USB standards and think I have a handle on the technology.
I tweaked the code to make it look like a Mass Storage device using bulk only protocol to the host. The AVR handling the USB interface will simply transfer the USB mass storage commands/data/status between the AVR handling the disk interface and the USB bus.
So far the basic transfer is not working, but I think I have a good grounding on the technology, and now the process becomes a debug effort.
Stay tuned…