The red LED you see in the back of the PS2 is the optical out, every ps2 has one. Why yours is lighting up 100% of the time I can't explain though. The status LED of the Crystal Chip is located directly on the chip, so you really can't see it unless you have the ps2 dissassembled in front of you and you turn it on. I'm not really sure what to say about the rest of your problems.
v7 CC Pro 2.0 SLE w/ 320gb hdd & running PS2 Linux on official 40gb hdd
v0 scph-10000 with PCMCIA bb unit running PS2 Linux Beta Release
v0 scph-18000 with PCMCIA network adaptor