ANSWER: vi /boot/grub/grub.conf remove nomodeset

And, the question was - why is HDMI broke on my Fedora 16 install?

I booted F15 - no HDMI. I booted the F16 LiveCD. HDMI works fine. I upgraded to F16 - no HDMI. After much hacking around that I won't retell -
for some reason my F15/F16 installs were booting with the nomodeset option set. No idea why. But, after I removed that output works great on HDMI, both sound and video.

This all happen on a Dell Latitude E6420 laptop. So there's the answer, I hope Google will find this solution for those that come looking.

Thanks. I hope it is correct.