Thanks for the response Richard. Followed your advice, and put the multimeter on the various points you suggested and no voltage reading found at those points. Jacked up the car and checked the starter wiring too and all looks good and secure. I have cleaned the battery terminals several times. Its not a issue of bad contact with the battery or ground. When this condition presents itself I'm get a reading of only 9 volts at the battery - something is draining 3 volts.
I'm wondering; Does the starter get a small amount of voltage during the diagnostic test? Maybe something broke in the starter and is creating a small short that is causing the 3 volt drain. This could explain why half the time when I do turn the key and get full 12.5 volts and then proceed to start the engine all I get is a click from the starter. I think I will disconnect the ground from the starter and see if the 3 volt drain continues during diagnostics. (I have already beaten on the starter with no success.)