It sounds like "damping off". What kind of soil mixture are your using for your seed starting?

Since I was growing them in pots I started the seeds in ferry morse seed starting mix and then transplanted to bigger pots with miracle-gro potting mix.

Are you starting them indoors? Now that it is warm, try them outdoors... if it is the dreaded Damp-off, air circulation from being outdoors will help stop the fungus.

I start them indoors then gradually move them outside.I start moving them out in the evening in shade and gradually give them more and more sun.

Here's a couple suggestions:
1. It does sound like damping off. Try watering your seedlings with Chamolmile tea until trasplant size.
2. Sounds like you are transplanting too soon. At 1-2", they barely would have 1st set of true leaves, let alone 2 sets which is the suggested growth size before transplanting. The first little set of round leaves don't count, as they were just the seed covers, ("cotelydons", I believe)...so wait until they are bigger to transplant.
3. When you do transplant into large and deeper containers, poke a hole deep into the pot, and plant seedleing deep, with it's first set of leaves at ground level.
4. Miracle Gro soil may be too harsh for tiny seedlings. (It is full of chemical fertilizer) Just pot them up into regular organic potting soil.
Hope these tips may help you, as much as they have helped me...
Enjoy! Lynn

Most of them never develop a true set of leaves no matter how long I wait.Have been trying different things .Will try what you suggested thanks a bunch.

Also make sure the cups you're starting them in have drainage holes poked in the bottom. Otherwise the soil will stay soggy, which is a sure recipe for root rot. Your seed starting mix when you germinate them should be about as moist as a squeezed-out sponge; while they're tiny, water with a spray mister just enough to keep the surface of the soil moist, not wet through. After they've developed a little, water thoroughly with a watering can, but let the top 1/4" of soil dry out between waterings.

I agree, start with clean, sterilized cups, then start them outside in the sun. They will sprout sooner, be stronger, and you won't have to harden them off at all. And you will avoid damping off.