After doing research on how the game systems work and what the consoles are looking for I was able to find a fix. I would like to thank all of you for your responses and being so helpful.
dynamic-ip-and-port NAT was the problem. when this type of NAT is used every connection the game console sends out gets a different ip and port. This will not work because the way the consoles communicate is via UDP and they expect to use the same ip and udp port for 2 way communication. dynamic ip and port on PA seems to rotate the ports and ip aggressively. But on a cisco ASA it seems to use the same ip and ports per source ip as long as the connections stay active. Basically cisco ASA does not rotate the ports and ips as aggressively and attempts to maintain the same ports the client used to for udp communication. Keep in mind I am using dynamic NAT on the cisco ASA meaning I am using a pool of ip addresses.
I am a heavy user of BSD and linux so after reading that on bsd and linux firewalls you must have the static-port option enabled. I did some thinking and changed the NAT rule to STATIC. I was able to get away with this because our ISP allocates me a /20. I do not think having a /20 helped in any way because I have known of people who have had 10+ console on a single ip and it worked but I did it anyway because I had it available to me. I plan in the near future of just doing away with NAT and doing direct IP assignment.
Here is the FIX that worked for me without special VLANS or opening ports manually or assigning IP addresses directly to clients. I put this into production 24 hours ago and students are reporting they are able to use playstation and xbox consoles now showing nat type 2 and moderate when running connection tests. They also have 2 way voice communication now when playing inside of the games.
Changed NAT from dynamic to static. I assign internal /24 ranges to our LAN network in the buildings so I also assigned a /24 public ip address pool. I also made sure bi-directional was set to yes
Step 2 created a application filter called Game Consoles - I know this was over kill but it included xbox-live and playstation-network.
Step 3 - Create the security rule using the Application Filter and disabled server response inspection
Step 4 - Cleared the NAT tables via SSH
Made a few phone calls to the students and asked them to test the connections and I could tell by the OMG it says type 2 ( playstation users ) and for xbox users it says moderate now instead of strict.
They logged into a few different games and all reports it was working without lag and they were able to communicate via the headsets.
I hope this helps people in the future.
