I am trying to operate an 8-bit analogue output from pins 5-12 of arduino. When running from usb power the nano and the code on it work perfectly. However when I run the device from a 5v source connected to the +5v pin the digital outputs are all constantly at about 1v. This triggers the DAC to output its full value.
I have set the digital pins to output in the arduino code.
My guess is that a ground is not connected. If as you say it actually works but you only read 1V on the output pins it looks like your measuring reference is not right.
your voltage source doesn't have a voltage stabilizer,
you could use a power supply that gives a stable 5v voltage (for example a battery charger or a phone charger, double check with a multimeter) or use a voltage supply of at least 7v connected to the vin pin of the arduino.