I tried two different ISOs one from demonoid and espalwii, i burned new super mario after no more heroes and it runs ok.
I'm using ImgBurn and sony midia burned at 2x.
This is from disc, even with other loaders, i tried Uloader and GeckoOS, the geckoOS gives the same error and the uloader gives Error number 3. I don't know about the modchip, sry.
i'm using:
4.2U
cIOS38 rev 17
neo gamma 7, 8, beta 15 and RC1
I have modchip too.
When i try running No More Heroes 2 i receive this error.
I can play New Super Mario Bros with no problems.