CMDEXEC The process could not be created for step... (reason: Access is denied). The step failed
ok, so instead of using a CMDEXEC job step, I changed it back to a t-SQL script step replaced the batch file name with the full string:

EXEC xp_cmdshell 'c:\dircommand.bat' 


and it works.  So I am not sure what the problem is with Operating System job steps but at this point I am passed the hurdle.  funny thing is, I have another server setup the other way and it works fine.  Thanks for the offers of assistance.