Your post is confusing me like no other
1. So, when the chip is on it will not load the hacked bios, then it goes to the "needs service" screen? And when the chip is off, it boots like normal to the original xbox dashboard?
2. Or, are you saying that the xbox works fine when the chip and the hacked bios is loaded, but then boots to the error screen when you turn the chip off and try to boot to the original xbox bios.
If number 1, it is either corrupt bios on the chip or one of your wires on the mobo have popped out of place. More than likely, it is the popped out wire.
If number 2, connect to the xbox via ftp and replace the renamed, homebrewn app "xboxdash.xbe" with the original "xboxdash.xbe". If you completely backed up the C partition, then just replace the entire partition. However, you should be getting an error code instead of the service screen. If it is the service screen, then it is possible that the onboard tsop has been fried.
Also, make sure you soldered the switch to the on/off prong and not the bios switch prong.