Robert - in the new example I notice you are not using presolve in the solver definition or definition the history term for the displacement variable:

'ls' : ('ls.scipy_direct', {
    'presolve' : True
}),

variables = { 'u' : ('unknown field', 'displacement', 0., 'previous'), 'v' : ('test field', 'displacement', 'u'), }

but consistently used these for other time step problems. Any reason? This really emphasizes my lack of understanding of the internals.

-- Andre