Well guys I'm back to the hours of frustration...
The above suggestions worked great within RSD itself, but doesn't work when viewed in an actual browser (both uploaded to the server and also when viewed in a preview browser (Firefox) through through RSD.
I made a stripped down page without other html or css that might have caused the problem here:
http://icetoe.com/test.html
So maybe I misunderstood the process. I have <image-1>, 900px in place at the start. Moving the slider over to my breakpoint (487px), that is where I want to replace <image-1> with <image-2>. So in the design tab area I changed the image from <image-1> to <image-2> and everything worked as expected when sliding back and forth within RSD. But in browsers the <image-1> remains across all breakpoints and just gets smaller as the browser window gets smaller.
I have saved several times and exported several times (deleting the export files in between times). Is this a program glitch or am I missing something?
-Mike