I just wanted to follow up on my own issue in case it could help somebody else.
It turns out I could get rid of the busy signal by changing the signalling option in the zaptel.conf and zapata.conf files. You have to change the signalling option to match in both files, otherwise you will cripple your PBX. I changed my signalling from fxo loop start to fxo kewl start.
On a seperate but related issue, we were still receiving a quick millisecond busy signal clip at the end of calls made from the PBX side through the rhino channel bank to analogue lines. This happened when the caller on the PBX side hung up first (the analogue end would hear the clip). This turned out to be a timing issue. In the zaptel.conf file there is a "span" option. it read as follows:
We changed it to be:
the difference is the second zero was changed to a "1". This changes the timing to come from another device rather than within the T1 card (perhaps the rhino box). For some reason this sloved the problem.
P.S. Any changes made to the zaptel.conf and zapata.conf files require an asterisk reboot before they become effective.