have you tried upgrading the Region X driver?
http://www.dvdregionx.com/english/x_key_codes.htm
I have a pre-M-chipped PS2 (30003R), and using Region X for region 1 discs no problems. have you also tried double reset booting to Region X disc? M-chipped PS2 won't detect DVD video discs & PSX games (original and otherwise) if not double reset.