Hi Mike,
When you switch versions, are you performing the switch using the Table of Contents, or the 'Change Version' tool on the versioning toolbar? If so, when you execute the Select Layer by Location tool, be sure you are using the drop-downs to select the layers from the table of contents, and you are not browsing for the feature class.
If you browse to the feature class, and the geodatabase connection properties are set to SDE.Default, this will be the version used to perform the selection.