Jim, I just now tried this on a fresh Radiant instance. I installed the "Styled Blog" so I would have some content and css to work with. Cut and pasted the css from Styles/css into Design/Stylesheets/main and then deleted the Styles page (original css gone, copy of the original css in /css/main). Updated the layout to use Sheets, ie <r:stylesheet name="main" as="link" />. The radius tag renders as expected <link rel="stylesheet" type="text/css" href="/css/main?1280863253" />, but the page is not styled.
Can't see that I've missed anything. Could it be a caching issue, that something is pointing to the old, non-existent css? -- marshal