brattest:
1: The fio provides 3.3v while the data sheet states a range of 3 - 5.5v. Could it be that 3.3v is sufficient for a few sensors, but not for a larger number?
Yes. It also depends on how long the cables are in total, reflections at each connector due to impedance mismatches etc.
2: I chose the audio jack cables/connectors due to ease of supply if wanting to expand cable length.
Any reason for this cable not being a good solution?
No, but you should try to avoid a "tree" structure with your cables, rather aim at a "chain", and not too many of your "splitters", because the contacts there will decrease the signal quality
3: Any other idea of what might be wrong?
IIRC, One thing is that the 4k7 resistor should ideally be placed at the "far end" of the bus, i.e. close to the farthest sensor (in the 3.5mm jack as well). You can try with 2 4k7 (one at each end of the chain), it shouldn't hurt.
In general, since you only use 1 pin/chain, it's a good idea to keep the number of sensors on a chain to a minimum (3-5). You have many pins on a Fio anyway 
Can you check with a 5V arduino if it works better ?