Well, I seem to have this under control now! I switched to a #24 round point regular ole needle as advised by you and Steve. When I removed the #25 diamond point I noticed it wasn't squarely in...it was turned a little cock-eyed. I think I need new glasses! That twist must have been binding the thread enough to throw everything off. But with the new needle in (correctly!!) and the bobbin tension set back to 8 ounces everything is looking really good. After a little fiddling with the top tension I'm getting a nicely centred lock-stitch. The #138 thread is tight and buried just a little into the urethane coating without cutting it...top and bottom. I don't even need to change tension when switching to heavier material. Life just got easier and sweeter! And no lubrication. This is an excellent machine.
You have to keep a close eye on tension at the start of each job with biothane. I just sent back a couple halters from another sewist doing sub-contract work for me. The design had a black underlay with a lime-green overlay. He had black bobbin thread and green top thread which should have looked good...except...the top tension was too high and the bobbin thread was poking through here and there. Looked like it was covered in fly dung or dirt. So back they went. This guy will learn just as I have but sometimes it's a costly lesson.
Thanks for the advice Leatherworker.