Interesting, I would think you should still get to open boot firmware.. Perhaps without an upgrade it won't initialize memory beyond 128MB.

Assuming just adding the extra memory module is enough, the fact that you don't see anything with the extra memory (and do with it disconnected) seems more like a bad memory chip to me.. These are very easily damaged when soldering by hand.

Personally I might have soldered a test socket on to the board instead of the memory chip itself. Then you can easily pop chips in and out.