I'm trying to figure out what I'm doing wrong with the cheat
codes. The only cheat I use in IWD is the CTRL+J jump
cheat because I find it tedious to move across already
empty maps (a good example of this is Dorn's Deep. I got
very tired of going out to rest only to come back in and
find more Blue Mycconoids and Ettin's. Good for experience
but bad for supplies).

I recently re-installed IWD and the HOW expansion. My method was:

Icewind Dale
Heart of Winter
Trials expansion

I never installed the 1.05 patch since I figured that with HOW
and the Trials expansion, I'd be at a higher rev. I also
installed the 1.4 HOW patch.

However, when I put Cheats=1 and use the cheat commands I get
"Nice try cheater".

Was my assumption wrong? Do I have to go back installed the
1.05 patch to IWD and then the remaining patches?

I had the same problem. Change CHEATERSDOPROSPER to GETYOURCHEATON and it will work fine.