Aha, I fixed it. Since this doesn't seem to be a common problem, I'll post my experience. It actually was similar to what happened to Colonel Panic.
It turns out it was somewhat related to when I changed out the damper actuator. I had a feeling that there had to be something stuck in the knob mechanism, or just a broken tooth on the gear (after seeing what happened to the damper actuator, why not?). Well the thing is, when I put my aftermarket radio in I used these plastic retainers to hold it securely in the bracket. When I pulled the radio out to gain better access, one of the retainers fell out and apparently dropped right into the mechanism for the knob. Of course it was impossible to see at all, and I couldn't confirm it until I completely removed the entire white plastic knob assembly and shook it around. Sure enough, a little plastic retainer came falling out.
A little blurry, but it's right at the tip of the yellow gripper thing.
I pulled it out and everything was working back to normal. Reconnected everything and I'm back to having control of my air temperature.
Also, I seem to notice a lot of people on here talking about not being able to get the knob assembly out without breaking it. Well mine came out just fine. The only thing you have to be sure to do is take out the screw behind the center knob and then insert a small screwdriver on each side between the assembly and the little chrome looking things to press down on the clips holding the assembly in place. Then it pops right out. Of course, you also have to remove the plastic around the shifter to also remove the plastic on top of the knob assembly.
Depress the clips on each side of the assembly to pull it out.
The hardest part about this for me was disconnecting the cable from the diverter knob. First, it was a pain to get off the hook on the knob because it was on really tight and I think I managed to bend the cable in doing so (but it still works fine). Then you have to look in from the front of the knob assembly and push the cable out of it's clips on the assembly with a screwdriver ( in hindsight, I probably could have pushed the cable out of the clips first and then I could have gotten it off the knob easier).
The lesson learned is that any time I go to remove my radio, always turn the temp knob to full hot first because that way the mechanism doesn't have that open gap on top to allow stuff to fall in to.