Arduino ADC behaving oddly
A note on your LED driver. The base voltage is the sum of LED voltage + voltage drop across resistor + base-emitter voltage. If you're running off a 3V supply that should remain somewhat below the 3V to have some base current. A 2V LED + 0.7V base-emitter will only leave 0.2V for the resistor. At 200\$\Omega\$ that's 1mA, which explains why the LED lights so dim.  

It's also possible that the transistor isn't saturated. For 20mA LED current at an \$H_{FE}\$ of 100 you need 200\$\mu\$A base current. If there's only 100mV across the base resistor that will give you only 100\$\mu\$A.  

Actually in the current schematic the base resistor is superfluous. The resistance seen from the base is the emitter resistance times \$H_{FE}\$, so with an \$H_{FE}\$ of 100 the Arduino will see the 200\$\Omega\$ as 20k\$\Omega\$!

I would suggest to move at least the 200\$\Omega\$ resistor to the transistor's collector side.