When we bought the house the pump was wired directly to the breaker on a 240v circuit. I went to add an outlet and a sprinkler controller between the two. The picture shows the old vs new set up. The motor wont come on but I read 125v on each terminal with my volt meter. I replaced the capacitor and still no dice. The motor is only about a year old and was working fine when the conversion started. Any help would be greatly appreciated.
You got twisted around and managed to put both pump "hot" wires on the same pole of the supply.
Or, one of them was abruptly disconnected.
Normally, this happens when someone rearranges the circuit breakers, doesn't understand what a tandem is, or installs a GE thin 2-pole breaker with a hammer. Thus they land both poles on the same AC power phase. However in your case you did not disturb the panel since it last worked.
But since your power stops at a receptacle enroute, maybe there's a problem there. To start with, don't wire both poles to the receptacle. Have one hot pole bypass the receptacle altogether - it will keep things simple and allow that receptacle to be upgraded to GFCI, which it probably should be, eh?
I could also see it happening if you tried splitting the receptacle to feed both poles to it, forgot to break the tab, and the resulting short circuit burned out a connection*. Because of the broken connection, the whole shebang would be fed off one pole and you'd never know it.
Or it could be someting completely out of left field, like a lost hot wire from the utility pole. Your water heater's resistance would connect the two poles/phases to each other, restoring weak power to the dead pole/phase, but would measure near 0V between them.
* you know, like from a backstab or improperly torqued screw terminal. NEC 110.14 now requires torque screwdrivers for this reason.