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If that's normal with this chip then i think i have a problem with the xbox mobo!!
Yes the LED on the Chip itself does blink red this is normal.
However your Xbox restarting or whatever is not so you have a problem with your install.
The LED on thechip blinking red has nothing to do with an error
If you get any weird problems after installing one of these always flick the bank switch back and forth a few times sometime in transit they are subject to pressure which stops them making contact internally. A few quick flicks and they will be fine. I have not had to link the switch out yet although someone has I believe