Thanks for all the help everyone, but I've actually solved it myself and it was SUCH a silly mistake too... Consider this line...:-
::Rectangle(bm_hdc, xPos, yPos, xPos + xSize, yPos + ySize);
Nothing wrong with that at first glance, right? WRONG! If you look at my code, I create a compatible bitmap of the required size to contain my rectangle and try to render the rectangle into this bitmap (which is selected into the DC).
But... WHERE in the bitmap am I rendering? xPos and yPos are window positions of the rectangle, but I'm not rendering to the Window DC am I?!? d'oh! That's right, xPos and yPos should both be 0 because I'm rendering into a bitmap of the correct size and it's when the Window is displayed that xPos and yPos should contain screen coordinates!
Wow... what a dumb mistake and thanks for the nice spot on the HDC from the Window rather than from the compatible DC. I did know that a memory DC has a 1bit depth, but still made that classic blunder. Thanks everyone.