Socket.io - Origin not allowed by Access-Control-Allow-Origin

I know there has been some discussion on this topic on SO, but I cant find the answer to my question. I have a web page running on the server with Aptana on localhost:8020. The javascript on the page is hitting a node server I have running on localhost:1337. Here is the node code:

var io = require('socket.io');
var http = require('http');
var sys = require('sys');
var json = [];
var server = http.createServer(function (req, res) {

  var headers = {};
  headers["Access-Control-Allow-Origin"] = "*";
  headers["Access-Control-Allow-Methods"] = "POST, GET, PUT, DELETE, OPTIONS";
  headers["Access-Control-Allow-Credentials"] = true;
  headers["Access-Control-Max-Age"] = '86400'; // 24 hours
  headers["Access-Control-Allow-Headers"] = "X-Requested-With, Access-Control-Allow-Origin, X-HTTP-Method-Override, Content-Type, Authorization, Accept";
  res.writeHead(200, headers);
  res.end();
});
server.listen(1337, '127.0.0.1');
console.log('Server running at http://127.0.0.1:1337/');
var socket = io.listen(server);
socket.on('connection', function(){
  console.log("Connected");
});

I am handling the cors request by changing the headers, which I do all the time. My client side code is typically socket.io beginner stuff. Here is the tag from my code:

<script src="http://cdn.socket.io/stable/socket.io.js"></script>
    <script>

        // Create SocketIO instance
        var socket = new io.Socket('localhost',{
            port: 1337
        });
        socket.connect();

        // Add a connect listener
        socket.on('connect',function() {
            log('<span style="color:green;">Client has connected to the server!</span>');
        });
        // Add a connect listener
        socket.on('message',function(data) {
            log('Received a message from the server:  ' + data);
        });
        // Add a disconnect listener
        socket.on('disconnect',function() {
            log('<span style="color:red;">The client has disconnected!</span>');
        });

        // Sends a message to the server via sockets
        function sendMessageToServer(message) {
            socket.send(message);
            log('<span style="color:#888">Sending "' + message + '" to the server!</span>');
        }

        // Outputs to console and list
        function log(message) {
            var li = document.createElement('li');
            li.innerHTML = message;
            document.getElementById('message-list').appendChild(li);
        }

When I run the code I keep getting 'XMLHTTPRequest...Origin is not allowed by Access-Control-Allow-Origin' errors. My browser is chrome. 1. Why is my browser using XMLHTTPRequest and not a Websocket? 2. Why am I getting a Access control error when I am changing the headers? Thanks for all the help in advance.