KML data near Africa? Google Maps Projection Problem Repost

[TiffL]

Hi! Newbie here. In dire need of help! I really appreciate any comments/pointers.

I am not sure why my coordinates, no matter what KML is being served by a webservice ( setDataSource) call, are all plotted near Africa after I put in the options for google projection due to kml data shifting positions after zooming in and out (http://trac.openlayers.org/wiki/SphericalMercator)... :-(

//start here
        function init(){
        var options = {
                projection: new OpenLayers.Projection("EPSG:900913"),
                displayProjection: new OpenLayers.Projection("EPSG:4326"),
                units: "m",
                numZoomLevels: 18,
                          maxResolution: 156543.0339,
                     maxExtent: new OpenLayers.Bounds(-20037508, -20037508,
                                                         20037508, 20037508)
                };

        map = new OpenLayers.Map('map', options);
        var gphy = new OpenLayers.Layer.Google(
               "Google Street",
                {'sphericalMercator':true});

        var bglayer = new OpenLayers.Layer.WMS( "OpenLayers WMS",
                   "http://labs.metacarta.com/wms/vmap0",
           {layers: 'basic', projection: new OpenLayers.Projection("EPSG:4326")});
               
        map.addLayers([gphy, bglayer]);
        map.addControl(new OpenLayers.Control.LayerSwitcher());
             map.zoomToMaxExtent();
             OpenLayers.Console.log("initialized");
        }

             function setDataSource() {
        OpenLayers.Console.log("Setting data source to " + OpenLayers.Util.getElement('loc').value);
                if (layer != undefined) {map.removeLayer(layer)};
                if (selectControl != undefined) {map.removeControl(selectControl)};
       
                // Encode the destination url as a parameter string.
        var params = OpenLayers.Util.getParameterString({url:OpenLayers.Util.getElement('loc').value})
                       
        //  Make the http request to the transformer, with the destination url as a parameter.
        layer = new OpenLayers.Layer.GML("KML", transformerURL + params,
               {
                format: OpenLayers.Format.KML,
                formatOptions: {
                extractStyles: true,
                extractAttributes: true,
                maxDepth: 2,
          //tried the projection below, had no effect
               //projection: new OpenLayers.Projection("EPSG:4326"),
               }
               });
        map.addLayer(layer);
        selectControl = new OpenLayers.Control.SelectFeature(layer,
               {onSelect: onFeatureSelect, onUnselect: onFeatureUnselect});
                        map.addControl(selectControl);
                        selectControl.activate();
        }