Validation list from Mac Excel 2011 fails to function on Windows 7 Excel 2010

I created a worksheet on my Mac using Excel 2011. It contains numerous basic formulas (all around for years and years) that allow us to evaluate the cost of products based on 20 or so variables. Each of the "input cells" is protected using a "validation list" to ensure that only the correct range of inputs can be used.
The "validation look-up lists" are on the same worksheet as the calculations and data inputs. (Way off to the right).
The entire worksheet / workbook is protected so that only the unlocked cells can be accessed, and then only via the drop down validation list.

To ensure that my partners in various corners of the world (5 of us) can all access it with our platforms I saved it as an Excel 97-2004 .xls file.
Works fine on my Mac - Mountain Lion with Excel 2011, Works on my Dell with XP & 2010 (my test platform).
My partner in Florida however is running Windows 7 with Excel 2010. On his platform, when he clicks on what should be an input cell, he does not get the arrows for the validation list. Instead he can type numbers directly into the cell.
I have sent him a new copy in 2011. It asked him to download some upgrade (???) so it could read the 2011 .xlsx file, then proceeded to act in the same fashion - no drop down lists.
We looked over to the right and the validation lists are there.
He is completely non-technical, this all happens as if by magic to him, so getting him to analyze the formulas, lists, cell links.... is a non starter.
Does anyone have any idea why the validation function would not work across the different operating systems?

The cell references are fixed as a list lookup function I.E. =$AK$14:$AK$107