Simple : The modchip patches the ROM of the PS2.
The MODs in the market now DON'T patch HDD drivers code.
Modified modules (patched by the modchip) are loaded on the IOP ram and mixed with unpatched modules. That mixup can result of several random problems from boot of discs taking too long to boot or HDD and CD games not working at all. The problems vary from mod to mod due to the way each one patch the ROM being a bit diferent. Also varies from PS2 unit model.
For now the best solution is having a not moded PS2 for FFXI or having a luxury mod that allows to disable and goes 100% stealth. Seems like DMS3 team is looking for people to help them with the hardware required for them to go research this issue.
Ah ... The HDD DOES update the disc ban list on the PS2 ROM. Also does update a lot of IOP modules, nearly all of them.
In a 10k jap unit the solution was pretty simple as pulling out the memcard at boot make the PS2 don't use the HDD at all. But for expansion bay units you have to disconnect the HDD ....
SCPH-10000_GH-001 SCPH-15000_GH-003 SCPH-18000_GH-008 SCPH-30001_GH-005 SCPH-30000_GH-016(V4) SCPH-30001_GH-010(V4)
2xSCPH-10190, 2xSCPH-10350, 2xSCPH-10280
"**** j0 hackers!"
-Sjeep (As seen on TOXIC OS ELF...)