Thanks for all the advice and help. To give you an update, I gave Colt a call and talked to one of their smiths. They confirmed that something is indeed wrong with the gun and that could be a result of improper assembly. They would have to open it up to tell but unfortunately, they don't repair antiques. They gave me a referral to a guy who works on these religiously and is top notch. They also sent me the old manual. They were extremely helpful.
I don't like being dishonest or screwing anyone with any interaction I have with them so I couldn't let this go. I went back to the gunshop and respectfully talked to the smith who did the work. I first went to the counter and asked a sales person to see the same model they had in their used section. After a function test, hammer goes back every time...even with grip safety engaged. I said thanks and went to see the smith next.
The conversation with this man was pretty surreal and void of logic. He wouldn't budge on his position and is firm that my pistol is functioning correctly...even when I told him what Colt said and mentioning the functioning of the other 1903 behind the class.
After shooting him a bunch of logical questions about its functioning, he continued to insists that that is not right. He states that when shooting a 1903, the shooter actually "releases the grip safety between shots which allows the hammer to reset. Its just like a 1911...its the same thing...you briefly let go of the safety and re-squeeze, allowing the trigger to reset". (Pause) (I'm usually not speechless). Well, thats not like my 1911 at all...or any other semi-automatic I have shot. Are you kidding me??? What about double taps or rapid fire? How does that work? I feel like I was having a stroke talking to this guy.
When re-mentioning Colt's position or the gun behind the counter, he said that those guns are sold as-is and may not be functioning correctly. What?!!?!!?? He continues that he "doesn't want to be responsible for any liability associated with giving me a gun that isn't functioning the way Colt designed it". But you are responsible for making sure these guns behind the counter are functioning 100% before you sell them to the public? "That's why they are sold as-is". Wow. I wish I had a feel for how this guy thought before I brought it in. (Note to self...more small talk with the next smith).
I learned a long time ago not to argue with a fool so I wouldn't get anywhere with him...I don't think John Browning would get any farther with him either. Well, this place is on my stay away list.
Since in my area there are a lot of questionable smiths (a dying breed out here as I was told by other shops who wouldn't touch my 1903), I am going to send it out of state to the recommended gentlemen who works on these. I got to talk to him for a bit and mentioned the problems. He first thought it was the disconnector, however when I told him about how it seemed to work when leaning to the left and right, he mentioned that that doesn't sound crazy at all and more than likely sounds more like the leaf spring. Either it was assembled wrong or damaged. He would be able to figure it out in 10 min. The only additional cost I would have to pay would be parts (if spring) and shipping. I'm fine with that and for peace of mind. His rates were reasonable too. The only thing he cautioned about was if other parts were damaged...it is extremely difficult to find them.
I will be shipping it out this week so I will keep you all posted on what they find.