Joe, It's impossible to say exactly what the problem is. But one thing to keep in mind is that everything has to be clean - hands, clothing, area. I wear gloves and sanitize them, too.
I'm not saying that this is your problem - just something to keep in mind.
Mold doesn't start from nothing - spores have to be present. How do you sanitize?

Hi Joe:I in Nj also had exactly the same problem with this method.
Right now I gave up and just use Milk Jars three in a jar,and i have a plastic bottle with bottom cut,set in top to keep humidity high.I use Rough sand as for Pavement#1,from Home Depot.
It seem that will work,at least no fungi.
Best luck

Joe,
How long did it take for the mold to appear on the cuttings after placing these in the bags and then in the warm frig.

Hey fignut, Yea I did wear gloves when sanitizing with the same bleach mix. I cut all my cuttings and put them in a sterilized container. I scrubbed each one seperately with one 10 percent mixture in one other container for all the cuttings and placed them into another sanitized container. Then i cut some newspaper and spritzed some water onto the newspapers and rolled the cuttings up and placed them into a sealed ziplock bag. From there, I placed the bags into containers and placed in heated refrigerator that I had set to control at 80 degrees. After 3 days I started noticing gray fuzz on many cuttings.

Hey ottawan, if you look at the response I left for fignut it answers your question. Thanks for your help.

Hey herman, thanks for the response. I like to try your method but I am a little confused as to the milk jars are they glass jars ? Also how are the cuttings placed with the rough sand scenario ? In addition is there any hope for my fungus cuttings ? What part of Jersey are you from I live in south amboy. Much appreciated Joe

1 gallon Plastic milk containers.Fill it with pavement sand #1, make a 3 holes in it and put your cuttings in.
Cover with clear plastic bottle,or bag or whatever.
This will not work if you want to root 100 cuttings at once.
I am rooting only about 30 cuttings so far.
I am In Willingboro area

Joe :I have 2 bags of sand #1 and #2.I used # 1 at base and #2 top half.
Leave Bottle lid out and you will not get mold.The milk container need holes at bottom for drainage.
Set your container in well lighted area at 70 * F,or better
Provide a powerfull light,with Timer to extend the daylight to 15 hours.
It will root and grow.

Hi Joe
I read above that the fungus appeared three days after bagging with all that precaution. I do not have much experience to know that fungus can appear within three days after such precaustion as you mentioned. Could it be some kind of decolouration of deposits on th ecuttings? I hope more experience can pick on this topic as to how to check if it is fungus or just decolouration of some deposit on the cuttings.
I recently read a couple of threads on treating fungus on cuttings with Hydrogen Per Oxide H2O2 (on GW I believe). If it is really fungus, You may look for those threads on GW (or someone can point out if they remember); or you may google search with H2O2 or Hydrogen Per Oxide and read about it. Plenty has been written on this subject.

Also, look at the following thread:
http://forums.gardenweb.com/forums/load/fig/msg0520480320592.html?8

Joe, If you do have fungus, and if you sterilized your cuttings as carefully as you described, then the spores likely came from either the newspaper or the water. I have often had trouble with using newspaper, instead I prefer paper towels, which are somewhat sterile due to their manufacturing process. Newspapers have often 'been around the block'. Also, I always use bottled water, usually distilled water if I can get it. My house water is from a deep well, and somehow or another it is loaded with fungus spores, and invariably gives me a problem.

Joe, It sounds as if you are doing everything right, but elder is right about considering other possibilities of contamination - look at everything.
It is probably impossible under our conditions to kill all the fungus spores, so it is important that conditions do not promote fungus growth. Two things: 1. The paper (whatever it is) should be barely moist. I usually wet it down, then roll and squeeze it, to make sure it is uniformly wet. Then I cover it with a dry piece, roll that up, and squeeze until the paper is barely moist.
2. Plastic bags hold in moisture, but they allow some gas transfer. It's not a lot, but putting the cuttings into a situation where there is no air circulation might have an effect, too.
As for fixing the situation - it is very difficult to stop mold once it gets established. I think a fungicide like Captan or Daconil (Chlorothalonil) might be the most effective solution at this point. But be careful - they are potent chemicals and carry risk.
Good Luck.