I was updating my daughters bedroom and decided to replace all the outlets with new ones. (the old ones were painted over) everything was good until I got to the last outlet and tried to reconnect the new one it immediately sparked and tripped the breaker. I thought maybe I had maybe I had wired it incorrectly, had a bad outlet or a nick in the wire but no. I am baffled as I didn't add anything at all to this circuit to increase the load. Also one weird thing.... the breaker stays on and the rest of the outlets work fine as long as the hot and neutral on this outlet don't touch. I have them capped off separately and everything else is fine. Now what? Could it be that the breaker itself is faulty?
Are you saying that you were changing outlets when they were hot? Or simply that the last outlet sparked? If the latter, it could be a defective outlet or defective install. And it's possible that the sparking incident damaged a previously functional outlet. Don't re-install something that's charred. Look closely again for nicks in the insulation.
I'd try again with a new receptacle, but leave the outlet hanging out of the junction box temporarily and see what happens. If that works, then turn off the power, mount the receptacle and see what happens.
It should go without saying that all circuits should be off when you're working on them.
It's very common when replacing outlets to accidentally ground out either a wire or the screw terminals on the outlet, to a ground wire or to the metal side of the junction box. It'll work when it's pulled out of the box, but when you stuff it back in, pfoof! A common technique is to wrap electrical tape around the sides of the outlet to cover those terminal screws.
Do not use "backstabs" (where you jab a wire in a hole). They are widely viewed as unreliable and a bit dangerous. Either use the screw terminals, or the screw-clamp system used on better quality outlets. This page here discusses the difference. If you're not sure if an outlet uses screw-clamp, you can also use the screws in the normal way.
Cheap 66 cent outlets are cheap. You can get much better outlets, as the above link describes, in the $2.50 to $5 range. Some outlets have one of the slots T-shaped, do not buy those unless your wire is 12 AWG and your circuit breaker is 20 amps.
One problem with the cheap backstabs is the holes can be all over the place, and it can be unclear which holes you should be using. Not a problem with screw terminals, or screw-clamp as the hole is right next to the relevant screw.
The screws are different colors. Silver screws are for neutral (white). Brass screws are for hot (black, red, etc.)
Of course you know outlet runs are not loops, the hot and neutral should not be shorted to each other at the end of run. They should go to opposite sides of the last outlet.