OK, well I kind of have this working. I'm not sure what I did differently, but I again selected all of the features and now the 'Preset Template from Selected Features' is enabled, so I was able to to create a template that basically creates what I want, but with some issues. Here are the main problems:
1. When I click on the new template the feature created is EXACTLY the same as the one I 'cloned'. In reality the distance between the connection and the hydrant would never be the same, nor would the bearing from the hydrant to the connection. Basically all I can do with this new template is recreate what I had previously selected when making the template. Is there a way to just click where I want the connection (1st point), click where I want the hydrant (2nd point), then have everything just draw in?? That is what my .NET tool does. I was hoping the templates could do this for me.
2 All of the default attributes of the new feature are the same as the originally selected feature, but there does appear to be a fix for that.
3. The new feature will not snap to anything. The cursor will snap to features, but the endpoint that has the service connection will not snap to the watermain.
Any advice on how to get customize this to get the results I'm looking for??
Thanks!