Thanks for the quick replies. I think it's the battery because if I keep re-seating it I will eventually get a charge that will run Pleo for about 2 hours. I've also noticed that the battery can get quite hot. If it gets too hot it seems the cradle will flash red. At this point I throw the battery in ziplock back then toss it in the freezer, after it's cooled down I plug it back in and it will charge for 15-30 minutes and the dance starts again. I'm absolutely sure I'm putting it in it's cradle properly. It's easy to see why people can make this mistake, but once you get it in right, you know it.
I did order another battery from ebay, hopefully it will come soon, but I am worried it won't solve my problem. I know the cradle has a chip in it to tell it when the battery is done charging, to keep it from overheating and exploding, which is what makes me think it's the cradle.
Is it possible that it stops charging if the battery reaches a certain temperature? Maybe my battery is running too hot to charge fully? Does anyone know if the homemade batteries run any cooler?