Those plants all look pretty healthy to me. Perhaps the leaves being dropped were the first (seed, cotyledon) leaves? Those don't necessarily hang around. Once the regular leaves emerge, the plant doesn't need those anymore. In fact, those cotyledon leaves are used by the plant as an energy source until the new leaves can start photosynthesizing.

The top picture seems to suggest that the lights are well above the plants, and that the plants might be a bit leggy. The lights should be just an inch or two over the foliage, to make sure the plants get enough.

Also, one reason cotyledon leaves may be dropping early is that they are being used up, because of lack of nutrients. Organic fertilizers are pretty slow acting.

Thanks very much! It's more than just the cotyledon leaves. But bringing the lights down is a good idea! And maybe an additional foliar spray would get some nutrients in there more quickly?

Foliar sprays don't fertilize. That's what the roots are for. A shot of real nitrate might be the ticket.

Agree about slow growth. Make sure the temperature is warm. Peppers need warmth, and will grow slowly if cool. I'd shoot for 80F. Now, you're just a week or so away from planting out, so maybe heat isn't worth the bother. But next time you grow pepper seedlings, keep 'em warm!

Okay, thanks both!

I've never had good luck using peat pots, and I think it's a bad idea for you to withhold watering until the soil is so dry that it pulls away from the pot.

Peat pots are fine for growing seedlings in. Where they fail is where you plant the seedling by planting the pot. That is, when it's time to plant out, pull the pot off (and next time, just use a cheap paper cup). But yes, waiting until the soil pulls away from the pot is too dry.

I've had nothing but problems with peat pots, even if not planted. They wick away the water, and tear apart the roots if removed.

Seedlings dropping leaves including cotyledons is usually due to a lack of nutrients and/or overwatering. IMO healthy seedlings don't drop coyledons. They probably need feeding. Peppers don't tolerate overwatering, either.

Too little light and overpotted - it looks like your potting soil is souring. IMO they all need to be repotted into smaller containers with a faster draining potting soil. They also look starved. But the big thing is too little light. The lights should be right down on top of plants that size.