We carefully reexamine the issues of solving the modified Bianchi identity, anomaly cancellations and flux quantization in the S-1/Z(2) orbifold of M-theory using the boundary-free "upstairs" formalism, avoiding several misconceptions present in earlier literature. While the solution for the four-form G to the modified Bianchi identity appears to depend on an arbitrary parameter b, we show that requiring G to be globally well-defined, i.e., invariant under small and large gauge and local Lorentz transformations, fixes b = i. This value also is necessary for a consistent reduction to the heterotic string in the small-radius limit. Insisting on properly defining all fields on the circle, we find that there is a previously unnoticed additional contribution to the anomaly inflow from the eleven-dimensional topological term. Anomaly cancellation then requires a quadratic relation between b and the combination lambda(6)/kappa(4) of the gauge and gravitational coupling constants lambda and kappa. This contrasts with previous beliefs that anomaly cancellation would give a cubic equation for b. We observe that our solution for G automatically satisfies integer or half-integer flux quantization for the appropriate cycles. We explicitly write out the anomaly cancelling terms of the heterotic string as inherited from the M-theory approach. They differ from the usual ones by the addition of a well-defined local counterterm. We also show how five-branes enter our analysis. (C) 2000 Elsevier Science B.V. All rights reserved.