If you stuck your HD in his box and ran Live then the kernal is fine.
Somthing is either corrupt on his drive or is not compatible with his eeprom.
I would try this:
Extract the contents of the slayers disc onto PC with Qwix or Craxtion whatever.
Put the 200 Gig back into his box.
Run the slayers disc.
Format all the drives again.
Setup retail on Large HD.
Then instead of installing the ms dash from the slayers disc, ftp into the xbox and copy the extracted /system/all/ c and e to their respective drives.
Then reboot the slayers disk.
ftp into the box and delete anything that was not in those c and e folders.
Ex: evox, lock.log, unlock.log, GameSaves on e other than the two from extracted slayers, ect.
Reboot retail and test. (With Chip OFF!)