I found the problem. It was in the count function. I instead dropped the count function and just called out the fields in the query and it worked. I am posting the original query which didnt work and the new query which does work. Thanks for the tips on troubleshooting Leather. I am renaming this post to [resolved].
ORIGINAL QUERY:
$limit = 25;
$query_count = "SELECT count(*) FROM " . $user_prefix . "_newsletter WHERE email LIKE '$letter%' ORDER BY email ASC";
$totalrows = @mysql_num_rows($query_count);
NEW WORKING QUERY:
$limit = 25;
$query = "SELECT nlid, email FROM " . $user_prefix . "_newsletter WHERE email LIKE '$letter%' ORDER BY email ASC";
$query_count = mysql_query($query);
$totalrows = mysql_num_rows($query_count);