Did you by chance tamper with any files on the hard drive in some way, or test the xbox before you put the chip in? The error number would be located somewhere on the screen, not sure exactly where though. Any problems when you have the chip set to disable shouldn't be trouble with the chip. But just out of curiousity, what happens when you have all 4 switches set to off and the chip set to disable?
EDIT: just read that you said it is fragging. Try realigning the lpc points, when it frags this is usually the problem.