It only works with retail discs. And it's not AR codes, it's Ocarina codes.
Action Replay is supposed to work if Action Replay and the game are each on a single disc(DVD-R), or are both on the same disc. You need the linked cMIOS installed and NeoGamma set to internal for both Action Replay on backups and Ocarina on retail discs.
If you have a modchip, then your discs are recognised as retail discs => no AR support from NeoGamma.