OK, This isn't good because... I've inputted the settings you mention in the materials tab in diffuse slot and used the baking settings i normally use in the render setup Sad but I'm still getting the appearance of theses pesky shadows.
In the diffuse slot of your material. Add a new map called "Ambient/Reflective Occlusion" located under the mental ray dropdown in the Material/Map Browser. Also it is called and Ambient Occlusion (AO) map. People may be confused by the term 'dirt map' as that name is selectively used.