Grumpy_Mike:
Not sure why that works the way it does
This is because you had a total lack of power supply decoupling originally.
http://www.thebox.myzen.co.uk/Tutorial/De-coupling.html
I had tried to use a pi filter before with a couple 0.1uF and 47uF caps along with a 1mH inductor, but still had a lot of noise. So far, using separate voltage regulators for analog and digital has been the only working solution.