Arduino Motor Shield (R3) / Arduino ATmega2560 problems

I have a project using the ATmega2560 Arduino board along with the Arduino Motor Shield to control two brushed DC motors. It's being tested with one motor currently, and the motor only works when the direction pin is set high. The current setup is this:

ATmega2560 Motor Sheild pin 28 (direction) --> pin 12 (dirA) pin 31 (brake) --> pin 9 (brakeA) pin 2 (pwm) --> pin 3 (pwmA)

There is 7V going into Vin on the 2560, 5V from the 2560 to the Motor Shield. 12V going into the motor voltage on the Motor Shield, with all at common ground from the 7V supply, except the motors, but we have tried that ground as well. The Motor Shield acts very strange when running. Sometimes when the direction pin goes high, it goes the same direction as if it were low but at a much slower speed. Sometimes when the direction is grounded the two LEDs on the motor shield turn on as if the motor was supposed to be running or something. We always check all the signals on a scope and they are always doing what they are supposed to be doing. Looking for any insight.

Forgot to mention, the shield works perfectly when used with the Arduino UNO (all of the pins align and you just plug the two together).

Does the motor power supply have a common ground with arduino ?

raschemmel: Does the motor power supply have a common ground with arduino ?

Yes, everything is tied to a common ground.