Sandzen:

Long story short...I have been renting a townhome since 1992 after sale of a principal residence due to a divorce settlement. I am living comfortably with investment dividends, interest, and Social Security benefits. I do not, however, have sufficient monies outside of my IRA to plunk down on a home purchase.

Is there a way to purchase a principal residence using a portion of my tax-deferred IRA holdings without it being taxed as "ordinary income" for the year of withdrawal?

No; there is an incentive, but it is useless to you because you are over 60.  Distributions of up to $10,000 to buy a first home are exempt from the 10% penalty for early withdrawals; see IRS Publication 590 for details.

There is no way to get any money out of a traditional IRA without having it taxed as income, and now that Roth IRAs exist, it would be unfair to Roth investors to create such an incentive.  There are many hardship exemptions to the 10% penalty for both the traditional and Roth IRAs; the most recently created exemption was for the 2005 hurricanes.