Jeff --
I'm having the same problems with FF/Safari on Reader. I will look into that with the Reader team. As far as GAFYD, it should work. Here is a list of all things that could potentially be a problem in these situations:
1) English not set for Browser + GAFYD
2) Third party cookies not enabled
3) Safari didn't install properly (Do you have the Safari -> Google Gears Settings menu?)
4) A bad capture (Did you get the orange icon while syncing?)
5) Leftover resources from a bad capture (your Gears Cache folder has bad data in it still)
Since you can't access GAFYD while offline, it really sounds like some part of the sync is failing. Have you looked in the Gears directory at the files that are cached? If it is saying you are offline then that means that the main HTML index page isn't getting downloaded. Or if it is, Gears isn't serving it correctly.
-Ben