As an auditor I would wager the possibility that you are NOT part of the domain. And therefore Windows is ignoring your DNS requests. Therefore you MUST ping the fully qualified domain name. That would equate to something like Host1.domain.com versus just pinging Host1.
Ding-ding-ding! You got it RoadClosed! I just got back from the on-site visit to the location and I found out - well actually confirmed that they have another domain and are in the process of converting to one of our main domains.

Thanks to everyone else for your advice as well! It helped narrow things down for me and also confirm what this area was doing and that they were doing their best to comply.