Well I did find a solution that seems to work 100% of the time offered by a gentlemen from the All About Circuits forum. There is a reset pin on the Arduino that needs to be pulled to ground for a minimum of 2ms. He suggested a 0.1uf capacitor between the rest pin and ground. So far it works. It works both ways with the MOSFET or without. Using the MOSFET turns the power light off so I believe it is a better solution otherwise I would have parasitic drains on the battery.
I'm still suspicious about the condition of the board, as I was subjection it to a lot of abuse with shorting the wires. And I also found out that the Yourduino RoboRed can handle 2000ma but not as a signal so another good reason for the MOSFET.
I have ordered a new board and will test it both with and without the cap. I will mark this thread as solved once I get the results of that testing.
Thanks to all that participated in this thread.
New schematic with cap.
