That only happens to me without XMLs in Smash mode (i dont have karaoke or art atelier)Loadiine v4 allready has some MAJOR compatibility using Mii mode to boot games.
The only game that doesnt boot in Mii mode here is "Ninja Gaiden Razers Edge".
So i tried 4.1 with "Karaoke U" to boot, and after the karaoke screen passes it goes back to Loadiine menu. Never had that hapenning.
After trying the ""Karaoke U" to try to boot several games for the fun of it i found it allmost useless compared to Smash Bros.
I haven't seen any more reports of problems with Karaoke mode I wish it was on the US store. Does anyone know if it is possible for me to access the UK store using a proxy or some other trick with another account (like PSN)? PM if you have to.