I would suspect that if it works sometimes, your connection is probably ok. I have run into alot of instances with Mach4 that works once, then not the next time, then ok again later or after restarting. Really stupid, as you noted.
as far as probing...I have had similar early on, but it seems to work good now. I played around with the "prep distance" , "retract distance" and "probe speed) on that touch panel. for instance if your "prep distance" is set to .25" and you eyeball your probe to your start position and it happens to be .26" the probe may or may-not make contact or barely contact. the next time you eyeball the start position you may be at .24" so it would work fine. But you do say you see a strike indication every time. Is it possible your probe feed rate is fast enough that the probe deflects more than the "retract distance". You would want those distances to be as short as possible to not waste time moving too far away from the part, but still far enough to make sure the probe opens and closes solidly.
For troubleshooting, I would say make your distances pretty large (ie prep=1" and retract=0.2") and slow down your probe feed rate (prep feed rate shouldn't matter). then make sure you place your probe closer than 1" from the edge before hitting the button. Then start tweaking those distances smaller and speeds faster.
I also note that the touch panel probing cycles just do a single hit, unlike the cycles on the probe tab, that do the double strike.