byteofthat:
Could a voltage spike situation when being plugged in be the problem? Would it damage the LEDs in such a fashion?
No...
Is it only one bank of LEDs that is failing? The one connected to power directly (although via a 220 Ohm resistor)? If so is it connected to 5V or possibly higher?
How many LEDs are you running in total, and do they all go through the voltage regulator on the Arduino?