I then ran the stepper without it being connected to the ball screw and found that jogging in the down direction the motor runs perfectly, but jogging in the up direction the motor jerks and moans and looses steps. Sometimes it even runs the wrong direction.
Assuming all electrical wiring is indeed correctly connected...
Try selecting Sherline 1/2 Pulse Mode, apply, then do a Mach3 restart and just see if that cures this issue.
If it does not then it could either be the Z axis direction pin is faulty on your LPT parallel port (or BoB) or the Z axis motor driver is faulty. You may be able to swap pin numbers for Z axis direction signal and rule out one possibility.
Tweakie.