MacBook won't charge or run on known good batteries, works on AC

My MacBook (mid 2007) recently stopped working on battery, I have to leave it plugged in to use it. This happened while it was restarting from a software update -- there was a small flash and noise (as apparently something fried itself) and now the battery won't function. I can see the battery charge level in the menu bar, so it will read the charge, it just won't work to power the computer or charge the battery. At first sometimes it would read "battery not charging" intermittently, but after a day or two it just went back to showing the level of charge.

I thought the battery had gone so I tried a new battery but I get the same thing. Any ideas as to what may have gone wrong? Should I try putting in a new battery connector/sleep sensor or does it seem like something else? It does sleep and wake up normally when I open and close the case.