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I had the same problem with a v3 and v2 ps2. I did checked the red diode and my meter went up half way. I put the positive tip on the side of the diode with the strip, and the negative to the other side. When you reverse this, you will get no reading (just what i pbserved when testing my chip). I had the problem of booting psx backups fine, but no ps2 backups, cd-r.dvd-r. What i learned from reading here was to use thinker wires. I was previously using 30awg for all my connections accept for the ground and 3.45v. I then used wires form a HDD cable ata 66/100 that i had laying around to connect to the bois. This fixed the red screen problem for me.
Hope this sheds some light for someone.