Skazzyyy:
2. I did the same thing except I used DC input which resulted in sensor not working.
My best guess is that arduino has same protection diode that drops voltage so I am ending up with a lower ouput and on the other side USB-B does not do that ?
Are you referring to the DC jack on the Uno? If so, that feeds into the voltage regulator on the board so you need to supply 6+ V in order for that to work.
Since this is +5V coming from the wall adaptor, you want to feed that directly into +5V pin on the UNO, not V-in, not the DC jack.