setting for lid down when monitor in use?

Here ya go:

http://docs.info.apple.com/article.html?artnum=300562

 

I have a similar setup and have run into the same problem, briefly. The problem for me was not having the MacBook connected to power.

 

On mine, it requires the power adapter to be plugged in. Also, instead of plugging in the mouse, keyboard and display and then closing the lid, try closing the lid first, then plug everything in after.

Took me a few hours to figure that one out.

 

I take my PB out of my bag, plug everything in while it's still closed, then click the mouse or hit the spacebar to wake it.