On the phone with Teco right now.  They keep telling me L1 and L3 is the correct terminals to use

Teco's FM50 user manual clear shows L1 &L2 for single phase 200V - 240V. Ask Teco why the breaker gets hot and trips when using L1 & L3. I'm curious for their answer. 

At the risk of jinxing myself,  I think I found the problem.

I replaced the on-off switch/20 amp breaker.  When I took it off, it definitely looked suspect.  This is big what if though.  Did it get hot and damaged from running on L1L3.... or?

I'm currently on L1L2. That's the way machine was set up.

Just for clarification, Teco model FM50 203. I wonder why they were so insistent on L1L3?

I have no idea why you were told to use L1 & L3. Teco (Westinghouse), Toshiba G3, G4, Automation Direct and almost all single phase VFD's including the cheap Chinese junk VFD's are electrical the same use L1 & L2.  I have a Automation Direct GS-2, 2hp, 240V drive wired to L1 & L2... runs great.  I don't think the drive is damaged unless it faults out on "OC" when powering it up. If you get a "OC".... the drive's power section has failed.  

Again... NEVER use a circuit breaker as a on/off switch unless it's rated for switching. If it is, it will be marked "SDR", "SWR" or "SW" on the case. Buy a separate 2 pole power switch instead which is allot cheaper than replacing a 2 pole 20A or 30A breaker.

One thing to consider is the incoming power wire size and distance from the circuit breaker panel... a 3hp motor and VFD, 200V-240V should have no less than #12 AWG with #10 AWG being the preferred to prevent voltage drop and overheating the conductors.    

Let me know how you make out.

Ran it for a couple hours today with no issues. Thanks for your help!