ClosetFab - CNC in (limited) Space

After dealing with random dropouts and freezes with LinuxCnC I have ordered a grbl shield and changed over to chilipeppr. Seems to run a lot better but occasionally I have issues with run-out on my cheap trim router. All together however it is working and I am slowly making upgrades to it to improve accuracy and rigidity. Here's something I carved:

Well, limited space indeed. My significant other decided we needed the room in the outside closet, so I had to move the machine to her mom's. With that, came a little more space (it's a garage) and more trials and errors and upgrades too. I have changed from LinuxCNC to grbl on an Arduino clone. Still using DRV8825 drivers, but now I just lug my laptop over there and use Chilipeppr to drive the thing. I have changed the design a little using some new drawer slides I found at Lowe's. (Hardware store) More to follow including some design pics!

Well, I have run into a peculiar issue that needed to be addressed, and all of the things I have done so far in troubleshooting have not produced any fruitful results.  

Description of the issue: 

Every time I try to run the default code that comes up in the axis window, I get a few missed steps on the Y axis that ends up skewing the rest of the cut.  You can see it evidenced here: 

The last 'C' in LinuxCNC is almost ALWAYS the problem, but sometimes it is the first C.  And another of a Harley Logo that I toolpathed using V-carve.  As it engraves the letters MOTOR the m turns out ok, but the O is pulled low, and I'd be lucky if the TOR stays together a little bit lower on the -Y direction.  Get my point?

So first thing I am going to do at this point is reinstall the system.  This may be a latency issue that I can fix using the older version of Ubuntu - Hardy Heron 8.04.  And just manually update emc2 to LinuxCNC 2.6.  Will update the progress.