I figured it out… my background images are assigned in the CSS to a container ID in each panel. It took me a while to realize that the cloned panel can only replicate classes and not ID properties. I re-assigned the background to a class and it was fine. I also now understand why each li uses class rather than id for panel1, panel2, etc.
Another issue that arose was the background was set to top center. Because the slide is moving, the background position seems to change during transition and it works better when a fixed top left value can be defined. I hope this helps out someone.