Error with CNC output:

[Lockdown]

My CNC Setup First:

Burny3 CNC Controller
Type: MNC3-03462-0

Burny Replicator 900
Type: MYX-09345

Problem: I'm drawing a part in Solidworks with SOLIDCAM and using it's Gcode to output to my CNC machine.

Picture of the problem:



What I'm doing in SOLIDCAM:
Fanuc System
Profile Operation

This is totally a 2d cut using a plasma or oxy torch.

G-CODE I'm using:

%
O5000 (F_CONTOUR_T2.TAP)
( MCV-OP ) (19-AUG-2009)
(SUBROUTINES: O2 .. O0)         
G90 G17
G80 G49 G40
G54
G91 G28 Z0
G90
M01
N1 M6 T2
(TOOL -2- MILL DIA 0.125 R0. MM )
G90 G00 G40 G54
G43 H2 D32 G0 X0. Y2.625 S1200 M3
M8
(----------------------)
(F-CONTOUR-T2 - PROFILE)
(----------------------)
   X0. Y2.625
   Z0.
G1 Y0. F4
   X2.5
   Y3.5
G3 X0. Y3.5 R-1.25
G1 Y2.625
G0 X1.75 Y3.25
G3 X1.75 Y3.25 I-0.5 J0.
M30
%

Any help into why my machine is making such a weird cut.

[Superman]

Your problem area is in red

%
O5000 (F_CONTOUR_T2.TAP)
( MCV-OP ) (19-AUG-2009)
(SUBROUTINES: O2 .. O0)         
G90 G17
G80 G49 G40
G54
G91 G28 Z0
G90
M01
N1 M6 T2
(TOOL -2- MILL DIA 0.125 R0. MM )
G90 G00 G40 G54
G43 H2 D32 G0 X0. Y2.625 S1200 M3 ( you're using D32 not D2 --- your choice )
M8
(----------------------)
(F-CONTOUR-T2 - PROFILE)
(----------------------)
   X0. Y2.625
   Z0.
G1 Y0. F4
   X2.5
   Y3.5
G3 X0. Y3.5 R-1.25 ( this is doing a R1.25 arc greater than 180° )
G3 X0. Y3.5 R1.25 ( try this )( for arcs less than or equal to 180°)
G1 Y2.625
G0 X1.75 Y3.25
G3 X1.75 Y3.25 I-0.5 J0.
M30
%

Your program will now give a box with 3 straight lines and a semi-circle lid plus a 1" circle with centre at X1.75 Y1.75 ( not exactly as your drawing )