Two things were wrong according to IBM. The first one may or may not have had something to do with it.
1. Make sure to kill ALL db2 processes before updating the instance.
2. When I applied FixPak 10, right after the initial install, I used 'db2iupdt -d'. I was told to use 'db2iupdt -u <fencename> <instname>' or 'db2iupdt -u <instname> <instname>'. Then log into a new session as the instance, do a db2level to confirm, then db2start from there.
After that it was fine.
Do be sure to rebind the db2 utilities in this directory:
"db2 bind @db2ubind.lst blocking all grant public action REPLACE"
Do not use 'action add' or it doesn't work properly as I found out.