14/2 homerun connects to receptacle (1). From receptacle (1) to switch (2) run is 14/2. From Switch (2) to Receptacle (3) is 14/3. In this box (2):

Both neutrals are spliced together
Source black & 14/3 red spliced together
14/3 black painted white

From Receptacle (3) to Light (4) run is 14/2. In this box (3):

Red connects to receptacle as hot
14/2 Neutral and 14/3 Black are spliced
14/2 black and 14/3 Neutral are spliced

Does this circuit comply with 2005 NEC?

Your losing me with your explanation.

Ca you draw a sketch of the wiring?

Why is a black painted white?

Where is Light # 4?

I think I overcomplicated it. Let me ask something simpler. There is a run from a switch to a receptacle then to a light (2-3-4). The receptacle (3) is always on and the light (4) is controlled by the switch (2). 14/3 is run between 2 and 3. The rest of the circuit is 14/2.

Is there a way to wire this circuit so that it is NEC compliant? Is so how?

See if I followed you correctly and if this diagram makes sense.

Exactly! I tried to draw the circuit in Visio and couldn't get it right. Your diagram is precisely what I wanted to convey. Is this circuit compliant with the 2005 NEC?

I would not have drawn it if it was not to code.