@andrewwynn - this is awesome.

I have to report a happy ending too. In my case, there was no rust on any part. I did the following that fixed the issue my DHC was having:

1. Got a replacement DHC. I noticed that the cable on the replacement was longer by couple millimeters.

2. I also stretched the cable a bit by pulling by hand. Not sure if it actually made any difference.

3. Took out the actuator and tried to reproduce the problem. There is a very tight tolerance between the neutral and locked positions of the ball-pin arm. It was just a matter of few millimeters. I sprayed some lithium grease and worked up the moving parts many times.

4. When I installed the actuator back I made sure the ball pin goes as much up as possible when I tightened them with three new screws. I think I was able to get it up by at least 1-2 mm.

5. When I installed the new carrier I made sure it sits perfectly. If the screw that goes into the lock cylinder goes smoothly, then it is an indication that the DHC is installed correctly.

6. With this I was able to unlock by pulling the bowden cable, which connects the inside door handle. At this time I knew it was going to work.

7. However, when I installed the outside handle. It was still not opening. The problem was that during the process of pulling out and installing the handle multiple times I had damaged the stem that goes into the DHC slot. This was inhibiting the carrier handle from being pull far enough to unlock.

8. So I used the trick I saw earlier in one of the threads on this forum, which is to drill a hole in the stem and use a small screw to washer. This made the handle fit like it was new!

9. And, lo and behold, it started working like a charm!

I also had to repair the window regulator and then put them back together and close up the whole thing. It has been holding up well.

Thanks a lot of all of you for your insights and help. I wanted to provide the details so the thread is complete.

@andrewwynn - I am still unsure if I understand your comment about the self-destructing tab part. Could you post a picture with this part highlighted. Needless to say I have not broken out the tab, but if I have to take it apart any time I will do that.