There is code in setup that would make it obvious if the arduino resets. also, my heartbeat led would temporarily stop (which it does if I manually press the reset button).
A capacitor on the 3v3 pin solved the problem. A glitch on that line might have been enough to cause the ftdi chip to reset? This doesn't happen when I use 5v instead, presumably because the 3v3 is supplied by the ftdi chip and the 5v is from the regulator.
Are you using the 3.3v to power anything? There is quite a low maximum current rating for that voltage source, something like 50 ma maximum with no protection for the FTDI chip if you draw too much current from that pin.
Not to sound like a jerk or anything but I don't think you read my previous posts or looked at the schematic. Otherwise it would be clear that yes I am powering the sensor off of the 3.3v line and I was asking about the possibility of pulling too much from the pin in this settup and causing the FTDI chip to glitch.
Regardless, the cap on the 3v3 pin solved the issue. The sensor is definitely not drawing 50mA, and if for some reason it is on powerup thats a problem but I guess for now it seems to be solved.