I was the king of transponder issues for a while. I found two things.
1) I had a bad connector in my transponder antenna lead - it allowed my transponder to receive signals (blink) but it would not send the signal out. I replaced the connector and it was all good again.
2) I got a tip that the ignition system would cause issues (constant replying) with the transponder due to noise it kicks off. I use EI and auto plugs and my transponder goes a bit nuts if the nubs on the top of the plugs are not screwed on tight, or if the leads are not snapped on tightly.
My problem turned out to be the altitude encoder. The reason they could not "see" me was the altitude reported was way off and the controller's console didn't show the airplane.