Your code seems to be doing the opposite of what you say is needed. And if you're applying power to the ESC and Arduino at the same time you may have a timing problem with the Arduino sending commands before the ESC is ready to accept them.
Why not just use something like the simple Knob example sketch to work out for yourself what initialisation it actually needs?
BTW it would be a lot more convenient if you posted your code inline using </> code tags instead of making us download it into the IDE. See How to use this forum - http://forum.arduino.cc/index.php/topic,148850.0.html
Steve