I would guess over watering. That's pretty much been the bane of my season. Also, you may want to move away from the peat pots. Those can wick away moisture from the soil.

Thanks Techno, what do you suggest on using?

Solo cups are an excellent choice to replace the peat pots. Make sure to puncture holes in the bottom. Your pepper seedling looks good just watch the moisture level and all should be well.

I don't think what is shown in the first picture is considered "Leaf Rolling". But I find that plant week and lacking vigor.

As far as the transplanting: I had both Solo cups and 4.5" round pots. I liked the latter. They have low center of gravity and are more stable than the first and support each other. So having some of both already, I used the pots

Maybe just a personal preference.