I'm no early Bally expert by any means, but it sounds like there may be some switch matrix issues. Check what kind of results you get in the switch test, and let us know. In this era of games, there are both switch diodes and capacitors associated on some switches. Check the offending switches diodes and capacitors if they have them to make sure none are bad or not connected, etc. With these games too, there are DIP switches on the CPU board that have associated diodes that, if bad, could cause some misinterpretation and problems with the switch matrix.

Sometimes chips are socketed with bigger sockets than the actual chip requires. Looks like that is the case here, as the schematics detail a 24 pin chip, which is what that one is.

As for the chip, it's definitely buggered and needs to be replaced. Not sure it is the root of your symptoms, but it definitely isn't helping anything. And, if that's a SCANBE under that chip, it needs to be replaced too.

SCANBE is a type of socket used on some of this era games that are BAD news low quality sockets. The socket would say SCANBE on it. Vid has a great picture point to SCANBEs with an always replace line. They should be replaced with machine pin sockets or proper quality sockets from Marcos or one of the other pinball suppliers.

Looks like the chip is actually a ROM chip at U1. Like I said, I'm not the best on early Bally systems, so hopefully someone who knows these board sets better than I can shed some definitive light on exactly what you would need at U1.