Cheddar came over today and helped me a bit. He also has no background in System 3s but is an excellent troubleshooter. We learned a couple of things today that may shed more light.
One, we had a broken capacitor on the left flipper. The local radio shack only had 50V replacements so we wired to in serial to make it to the minimum 100V we read was needed. Didn't fix anything, but it was one potential problem eliminated.
Two, after watching some Clay videos we learned the exact nature of the two switches at the front coin door. The top white one protects the memory, so me testing or trying to adjust things with the door closed and the playfield up is invalid. The switch ensures the coin door is open before anything can be written to memory. We also learned that the power kill switch (bottom white switch) can be pulled out to cause it to stay locked open, so we no longer have to manually hold it closed when the door is open. This is awesome!
Three, when the door is open and the tournament mode switch is set to On, we get to a menu that has several options (Free Play, Game Features, Special/Replay, and Extra Ball). Right now the options are continuously cycled through. So the 1st option is highlighted for a second, then the 2nd option is highlighted, then the 3rd, etc etc. While its highlights, the right button does allow for changes if we are quick enough. But the left button has no impact on menu selection (stopping or changing the cycle). I assume this indicates something significant as videos I have seen of this menu show no cycling.
Fourth, we actually swapped flipper switches and moved the right flipper to the left flipper just to rule out something with the switch itself. This made no difference, same behavior was seen.
So at the end of the day we are left with a quick setting menu that pops up automatically when door is open during tournament mode and is cycled through indefinitely. If you tap test button, the prompt appears "L flipper to step R flipper to select". This prompt stays up and nothing gets you past this. No pressing or holding of the test button or either flipper button in any combination. If I disconnect the flipper's sensor board, the test button will go straight into self test but I am unable to (obviously) use flipper buttons to make any changes. All three flippers continue to work in game with no issues and both flipper buttons interact with the in-game, on-screen menus with no issues.
Not sure what next steps are. I suspect something with the left flipper and/or the board (although its a brand new board).