DFSR member not replicating

Setup a DFSR folder between 2 servers and it was working fine for weeks. Now all of the sudden one member is not replicating any changes.

• If I create a file on SRV1 in the DFSR folder it replicates immediately to SRV2
• If I create a file on SRV2 in the DFSR folder it does not replicate to SRV1
• Confirmed this same behavior with a propagation test for each member
• When trying to propagate from SRV2 the Replication Status in the report says "waiting for arrival"

I see no event logs that could point to the issue apart from one saying the high water mark was reached (eventid: 4202) at around 3:00 AM this morning, but immediately after that it sucessfully cleanup some staging data and is now well under the high watermark (eventid: 4204).

I increased the staging folder on both members and restarted the DFSR service on both.

---edit---

I generated a heath report and found something odd.

Pre-existing content is not replicated and is consuming disk space.  
  Affected replicated folders: MY_DFSR_Folder
  Description: During the initial replication process for replicated folder MY_DFSR_Folder, the DFS Replication service identified pre-existing local content that was not present on the primary member and moved the content to D:\MY_DFSR_Folder\DfsrPrivate\PreExisting. The DfsrPrivate\Preexisting folder is a hidden system folder that is located under the local path of the replicated folder. Content in the DfsrPrivate\PreExisting folder will not be replicated to other members of the replication group, nor will the content be deleted by the DFS Replication service during any automatic clean-up.  
  Last occurred: Wednesday, July 17, 2013 at 1:21:05 PM (GMT-5:00) 
  Suggested action: If you want this content to be replicated to other members, move the content into the replicated folder outside of the DfsrPrivate folder. If you want to reclaim this disk space, delete the pre-existing content in the PreExisting folder.  

This doesn't make sense. Initial replication completed successfully weeks ago. Also this worries me because the server generating this error should be the one with the most up to date data. If initial replication started again and the other server is the master than this is a big problem.