I've also worked some on this difficult part of our tree. It appears that William Atwood is Margarett and James's father. He appears to be the same William who was living next to Sinnett Atwood in Shenandoah, Virginia in 1810. What has made it so difficult is that it appears that he married a Lydia Wood first, and presumably when she died married Mary Holmes. Then this part of the clan seems to go briefly to Hardeman County, Tennessee, then on to Muskingum Ohio, joining some of the other kids of James Joseph before they went on to Illinois and Indiana, and also following the Holmes clan his second wife was of which ended up in Fairfield County Ohio also.
I've been beating the path back from Mary Atwood who was widowed with Atwood children, then married Joseph Wilcox in Fairfield County, Ohio. After a lot of work and huge help from Ted Atwood (that I still owe a huge amount to on this!!!), the widow Mary Atwood, that later married Joseph Wilcox (his second wife also), on my ancestor, Abigail Atwood's, death certificate (who lived to a good age but with confusion at the end) had William Alwood and Mary Holmes mentioned as her parents. However, Abigails own children have the name clearly as Atwood, as do Mary's older children on their records; and in fact, Abigail Wilcox (Mary Holmes/Atwood/Wilcox's daughter) brother, George W. Atwood's orbituary mentions Abigail Wilcox as his surviving sister.
Clear as mud I'm sure, but the jist of it is that it appears that William Atwood of Shenandoah (later Page) County Virginia, was married to Lydia Wood and had some children (of whom I believe your Margaret and also James are from), then when she died, he married Mary Holmes; then migrated with his son (unfortunately also named William W. Atwood) and other family members to Hardeman County, Tennessee, then on up to Fairfield County, Ohio (in the part that later became Muskingum County). When William dies in 1835, his second wife, Mary Holmes Atwood, and her oldest daughter, Abigail Atwood, both marry into the Wilcox clan within a year of each other to older widower Joseph Wilcox and Abigail to his son William Harvey Wilcox. This has been horid to dig through but seems to standing up.
The next issue is in following William Atwood (1770 to 1835) to his origin. He seems to me to best fit as an unnamed oldest son of James Joseph Atwood, son in turn of Gilbert Atwood; but this is by rather weak inference and may turn out to be incorrect. William was living next to Sinnet Atwood in 1810, and married into the same Wood clan there initially, and we also know that Sinnett was acting as the 'ward' of Abigail (one of James Joseph's children, and appears to have been the bondsman for Williams first marriage---while at the same time William doesn't show as Sinnett's son on rather good data on Sinnett.
I'm hoping that the Abigail Atwood that I think may have been Williams sister (products of James Joseph Atwood), who married a Simeon Abbot; may have a descendant who can clarify this. There is also a chance that a part of the Holmes or Wood clans from the Shenandoah/Page Virginia areas may somewhere have a bible record or know of a church record that will prove or disprove this level. I'm a little skeptical though, noting that Ted has done a phenomenal job running down these details and putting the Atwood clans in perspective and the evidence gets real sparce here.
Ted has his web page up and I'd sure encourage Atwood's and Atwood researcher to check it out and add to it's forums also over time----he went to the trouble of data basing the information in a searchable pattern on a few thousand Atwoods!!! I'm not selling anything, just pushing for all of us to share whatever we can find! I haven't been able to find it yet if it exists, but there might be something in an early Ohio church also that would help more to prove who Williams parents were. Stan
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