Hi nittyknotts,
Is the yarn catching on the wheels under the carriage? If it is, tighten the tension on the yarn tension unit. Make sure the yarns are not twisted round each other.
Have you tried running the machine with a punchcard but no knitting?
If the needles select correctly and the punchcard rotates properly, you can discount any problems with the selection mechanism. Should there be a problem when you try this test, you will probably have to take off the back cover and give the machine a good clean inside. The other thing to check is the condition of the timing belt - the carriage locks into it when doing patterning - sometimes they get damaged and need replacing.
If everything runs OK when you do this test is suggests there is something wrong with the carriage settings. Do you have the tension set loose enough? Try one whole number higher than you would use to knit stocking stitch in the yarn you are using.
Hope this helps you sort the problem.
Regards,
Sue, June 2012