I found the reason. Even though Reporting Services have been Activated on the Site Collection the Content Types were not added to the Report Library. Once I went into the Report Libary Settings I could add the Report XXX Content Types to the Report Library and voila the Item Drop Down Menu Actions appeared.
My question to Microsoft is, "Is this a bug". Why would you force an Administrator to add the Content Types to the Report Library after the Report Library has been added to the Site Collection. Isn't that the reason that I added the Report Library to the Site Collection? I want it to work. It doesn't work as a Report Library until you add these Content Types.
Microsoft please review this scenario. It was quite annoying to find this additional necessary undocumented step.