OK, so i finally bought a small multimeter and found my voltages were switched.
I've verified that 5v is powering the arduino (and it is working through the barrel jack). 12v is for the solenoid and it isn't working.
If the lights go out the arduino fires the led which tells me that the solenoid should fire too but no luck.
First, 5V on the barrel means at best 4.5V, and more likely 3.5V for the Arduino. The chip will actually run on that voltage, but not as fast as on 5V, and if the clock is still trying for 16 MHz, you're in marginal territory.
Second, what's the driving the Solenoid when the Arduino LED lights up? Are you using a MOSFET, or some other switching mechanism? You can't run 12V straight through an Arduino pin, and you can't run the current of a Solenoid straight through an Arduino pin, either.