Ok, so I re-wired up the circuit and the Arduino gave a reading of 509 and 510. I tested the circuit with the multimeter and it now gives off 2.5v DC. Thank you!
I tried the DTMF library to no avail. The Goertzel algorithm library, when set to 697hz lit up the LED when almost any number was pressed. At least now I'm getting a reading. Should I start a new forum page for helping me with the library?
To understand the touch-tone system (it is almost like an LED matrix), look at the table here: Dual-tone multi-frequency signaling - Wikipedia