To the question of "Is the taxpayer's W2 wages exempt from the SS & Med taxes as in the SP scenario, or not?"
The answer is "NO." W2 wages earned from a corporation as an employee, even one you own, are not exempt from SS or Medicare taxes. ALSO, please be aware that self-employed owners of an SP DO pay SS or Medicare taxes IF they make more than $400 - see this from the IRS (section 4.3): http://www.irs.gov/faqs/faq-kw208.html
I am sorry, but you are incorrect and my answer is correct based on the instructions found at http://www.irs.gov/pub/irs-pdf/i1040sse.pdf
First, it repeats what I said about:
You may not be reading the instructions you indicated properly because they use the word "business." However, under IRS and legal dictionaries, a business is NOT a corporation and if you will note the instructions only talk about business and partnership income which, under legal definition are NOT corporations they are no different than SPs. Both the instructions you indicate and my answer are the same.