Comments:
1) - There are no smoothing capacitors either side of the regulator - what are you using to provide the 12v supply. If it's simply a bridge rectifier off a transformer then the supply will need smootthing.
2) - I assume the diodes are LEDS ? If so then you would be better off putting them in series with the resistors rather than in parallel.
3) - If they are not LEDS, then try removing them from the circuit, there may be some reverse bias or something causing the current to flow and possibly short out the supply ?
As Dave has mentioned - It does sound as if you are constantly resetting the chip before it configures itself.
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