When should the failsafe kick in?

It is possible. Failsafes are designed to activate when the receiver loses contact with the transmitter, when it senses interference from some other source, or when the receiver batteries run low. What brand of failsafe are you using?

3.5 volts? If I remember correctly, the OFNA FS will kick in if the voltage gets below 4.0 volts. Maybe the other brands do the same.

Best investment it to go with a 6V rechargeable pack. This will help in run time and boost your servo power!

3.5 on the reciever is very low.. my dynamite kicks in at 4v and I've seen some that do at 4.8 but it shouldnt "shut down" it should just apply the brakes.. does the fail safe have a light?? if so what does it do when you rc "shuts down"??

I have a ofna failsafe. and a ofna 1200 flat pack is 20-25 minutes normal or is that fast for the battery to be drained

that is way fast.. 1200 should last about 5 hours or so the web sight says.. with a 200 draw

Are you letting it charge fully or are you stopping the charge? what charger are you using to do it? and did you buy it used? Never buy used batteries unless you know the guy selling them personally.....if you never let the battery charge fully then your screwed...unless you get a good charger and wipe the memory from it....even then you may have crapped the battery out....

I got it new and I got one of those regular 12 dollar chargers to go with it. I only let it charge for like 4 hours the first time i ever used it then I charged it for 8 hours and when i used it today it only lasted like 25-30 minutes

First charge should be done over night or up to 16 hours.
Batteries have to be cycled a few times for you to get the full bang out of it.
leave the batteries on for a longer charge.
You might want to invest in a good charger if you can afford one.

What is a good charger?

Here's the link to your failsafe: http://www.ofna.com/failsafe-micro.html

Operates on 3.8 - 6 volts. I had an email from OFNA when I asked what voltage it kicked in, they said 3.8-4 volts. I can't find the email though.