Sounds to me like your Matrix might be functioning and installed just fine. Did you ever flash a BIOS onto the modchip? Your LED light is completely normal in modes #1 and #4 (mode 4 should look orange, and you should leave it in this mode so that you can flash your chip with new BIOSes once they are released), I never used a Matrix in modes #2 or #3, all I know is that either mode 2 or 3 disables the chip allowing you to boot into the stock M$ dashboard. If the LED behavior in modes 2 & 3 is not correct, then that could just be due to the fact that there is no BIOS on the chip.
If you have no BIOS, you'll have to use a programmer to flash the thing; or find a friend with a Matrix that would be willing to disconnect his modchip after booting up into EvolutionX or another hacked dashboard, and then have him flash your BIOS from EvolutionX.
To make a correction to the quote you pasted above, a fan on the GPL chip is usually an idicator of a 1.0 model, although some of the "older" 1.1's have the fans on the GPL.