Solved on my end.
Atmosphere works great with an SX-Core modchip installed on v1 unpatched switch.
The steps I took to get it working go as follows:
1. Set up SD card for Hekate/Atmosphere as you regularly would for an ordinary unpatched switch (I used NH Switch's Guide)
2. Drop boot.dat and hekate_ctcaer_"version".bin onto the root of the SD
3. "Cleanup" sysnand through SXOS. (Power on switch -> Options -> SX Core -> Cleanup -> Continue)
Since SXOS seemingly dirties your boot0/1, this is necessary to not blackscreen when launching atmosphere from Hekate.
4. Launch Hekate payload through SXOS. (Options -> SX Core -> Payloads -> hekate_ctcaer_"version".bin)
5. Launch Atmosphere through Hekate after all of your necessary backups.
That's it. Its quite simple.
A few things to note is that you need to have SXOS "cleanup" your sysnand after every power-on since SX-Modchip dirties your boot0/1 during your next power-on (this is why your switch will take an additional 30sec or so to power-on after powering-off a "cleaned up sysnand" state. Also I suggest you backup boot0 and boot1 through Hekate and save those files onto pc since those are the cleaner backups with less SXOS infection. Finally, note that booting into Hekate through SXOS can be sketchy every so often like
@gudenau mentioned, so don't be surprised when see a glitchy UI. Just power-off then back on and it should work on your next try or 2.