This year (few years later), in a square foot garden, I planted jalapenos, bells and habaneros, all did the same thing - sprout, grow to about 1 inch, stall, die.

Should I be starting these indoors, growing them to a certain size and then transplanting? Is there something else I'm doing wrong?

You can get all the info you need in the hot pepper forum, but I'll help a little right now.

Peppers are very susceptible to damping off. So, transplants are much more successful. Even germination can be tricky with peppers.

Here's a brief tutorial, but like I mentioned, the hot pepper forum is loaded with posters who are very avid about helping -- so all your questions can be answered there.

1) Use a seed starting mix(peat and perlite) in small containers. Seeds no deeper than 1/4". Keep at 75-85F till they sprout. Heating mats work best but some just use a cable box or something warm.

2) As soon as they sprout, get them under lights a couple inches away from leaves. You can invest in some grow lights, but a lot of people just use flourescent shoplights. Make sure you use "daylight" bulbs. 12 hours a day until they're ready to go outside.

3) Here's an important step -- Keep soil just moist, never wet. Let the soil become almost dry between waterings. To avoid damping off, I sometimes dip the whole container in about an inch of water so they water from the bottom up.

4) Peppers take a long time (10-12 weeks), but you can start early and go even longer. Just transplant to a little larger pot when it looks like you need to. The bigger the transplant, the healthier the adult.

5) Harden off like any other transplant then get in the ground or larger containers(5 gal or larger).

Good luck.

Kevin