RHEL 5.5 NIC Bonding

I am new to linux. I have a falconstor CDP installation which runs on RHEL 5.5 (Tikanga). There is a vendor option to bond nics in either 802.3ad or round robin, I choose 802.3ad. The server is connected to a Cisco 3750 switch.

The problem is dropped packets and eth03 wont come up in the PO (suspended). I am getting reports of dropped packets. When I look at the network files, things dont look right. I am not posting this without doing homework, I have spent the last couple days looking into RHEL NIC Bonding. At this point, I need help, before I make the changes I think are necessary. I dont think Eth0 should have an IP and I am not entirely sure what kind of load-balancing RHEL supports.

This is what is on the server

DEVICE=bond0
IPADDR=192.168.0.27
NETMASK=255.255.255.0
USERCTL=no
BOOTPROTO=none
ONBOOT=yes
MTU=1500
BONDING_OPTS="mode=4 miimon=100 updelay=60000"
 
DEVICE=eth0
ONBOOT=yes
BOOTPROTO=none
#IPADDR=192.168.0.27
#NETMASK=255.255.255.0
HWADDR=00:23:7d:e1:f8:66
DHCP_HOSTNAME=
MTU=1500
MASTER=bond0
SLAVE=yes
 
DEVICE=eth1
ONBOOT=yes
BOOTPROTO=none
#IPADDR=10.0.0.3
#NETMASK=255.255.255.0
TYPE=Ethernet
HWADDR=00:23:7d:e1:f8:68
DHCP_HOSTNAME=
MTU=1500
MASTER=bond0
SLAVE=yes
 
DEVICE=eth2
ONBOOT=yes
BOOTPROTO=none
#IPADDR=10.0.0.4
#NETMASK=255.255.255.0
TYPE=Ethernet
HWADDR=00:23:7d:e1:f8:6a
DHCP_HOSTNAME=
MTU=1500
MASTER=bond0
SLAVE=yes
 
DEVICE=eth3
ONBOOT=yes
BOOTPROTO=none
#IPADDR=10.0.0.5
#NETMASK=255.255.255.0
TYPE=Ethernet
HWADDR=00:23:7d:e1:f8:6c
DHCP_HOSTNAME=
MTU=1500
MASTER=bond0
SLAVE=yes
 
Modprobe.config
alias bond0 bonding
alias eth0 bnx2
alias eth1 bnx2
alias eth2 bnx2
alias eth3 bnx2
alias scsi_hostadapter cciss
alias scsi_hostadapter1 libata
alias scsi_hostadapter2 ata_piix
options scsi_mod max_luns=1
options sd_mod max_scsi_disks_fs=1
options bonding max_bonds=1
options bond0 miimon=100 mode=4 updelay=60000

CISCO SWITCH

*each port looks like this

interface GigabitEthernet1/0/5
 switchport access vlan 500
 switchport mode access
 switchport nonegotiate
 channel-group 1 mode active
 spanning-tree portfast
end 
*load-balance
 
SCHQYADR3750#show etherchannel load-balance
EtherChannel Load-Balancing Operational State (src-mac):
Non-IP: Source MAC address
  IPv4: Source MAC address
  IPv6: Source IP address