In the opening post mysearch wanted to have a better understanding of the physical concepts behind the effective potential so I would like to post some conclusions that might help and clear up some misconceptions (of mine).
The derivation given by Jorrie appears to be correct and and he is right that L = m( d\phi/dt)r^2 and not m(d\phi/dt)r as I suggested.
Looking at the equation for effective potential given by Jorrie
V_{eff}^2 = m^2c^4 \left(1-{2GM \over rc^2}\right)\left(1+{L^2 \over m^2c^2r^2}\right)
it is easy to see that at infinity the potential^2 is
V_{eff}^2 = m^2c^4\left(1+{L^2 \over m^2c^2r^2}\right)
The L term does not go to zero because L includes a hidden r^2 within its definition that cancels out the visible r^2 in the equation
If we expand L to base units we get
V_{eff}^2 = m^2c^4\left(1+{m^2v^2r^2 \over m^2c^2r^2}\right)
which simplifies to
V_{eff}^2 = m^2c^4\left(1+{v^2 \over c^2}\right)
V_{eff}^2 = m^2c^4+ m^2v^2c^2
This can now be expressed as the well known conserved energy-momentum expression of relativity E^2 = M^2 + P^2
For radii less than infinity the effective potential is simply the potential at infinity reduced by the gravitational gamma factor.
The above equations assumes constant orbital radius and glosses over proper time issues.
A better derivation can be obtained from this equation given in Wikpedia that makes the issues clear.
http://en.wikipedia.org/wiki/Kepler_problem_in_general_relativity#Geodesic_equation
<br />
\left( \frac{dr}{d\tau} \right)^{2} = \frac{E^{2}}{m^{2}c^{2}} - \left( 1 - \frac{r_{s}}{r} \right) \left( c^{2} + \frac{L^{2}}{m^{2} r^{2}} \right)<br />
Divide both sides by c^2 and rearrange:
E^{2}-<br />
\left( \frac{mcdr}{d\tau} \right)^{2} = m^2c^4\left( 1 - \frac{r_{s}}{r} \right) \left( 1 + \frac{L^{2}}{m^{2} r^{2}c^2} \right)<br />
For constant radius this becomes the familiar
E^{2} = m^2c^4\left( 1 - \frac{r_{s}}{r} \right) \left( 1 + \frac{L^{2}}{m^{2} r^{2}c^2} \right)<br />
where L is defined by Wikpedia in terms of proper time as is the expression for radial velocity that has just been eliminated.
This last derivation makes clear the assumption of constant radius in the familiar equation for effective potential.