I returned the sub to the dealer. A Paradigm rep happened to be there at the same time, and he said if the signal was cutting out while the blue light remained on then the sub was defective. That was exactly what was happening with mine. The dealer offered a swap for a new Monitor 12 sub or store credit. After mine and Joe's experience I no longer trusted that model.
Paradigm was the only sub manufacturer the dealer carried that I was interested in. I wanted to stay with a sealed unit, and after some listening, reading, and debating I settled on the Seismic 110. I originally had no intention to go with a 10" unit but I couldn't afford the Studio 12. And honestly, the 110 didn't sound awesome at the dealer (to be fair, they just did a quick set-up job for me). If I had to reach to this price bracket I would have preferred to wait to check out the new JL Audio E series, but this dealer didn't carry JL Audio, and so I felt hostage to the situation.
Fortunately, after just some quick tweaking the sub sounds better in my room than it did at the dealer. I haven't even run PBK or Audyssey yet. This sub is built like a tank (heavy aluminum enclosure)! I was going to hook it up with a 12v trigger, but the shop was out of the mono cables. So I switched it to auto-on, and even at low levels / light bass content it hasn't cut out once. I still would have like to compare it to the new JL Audio 12", but it is a relief to have a properly working and good sounding sub.
So BeeMan, you were right.