I got it figured out. I was told by someone very knowledgeable about the SAM system that it was an error erasing a flash sector and said it was very rare, and it had confirmed my suspicions. Thank you sir_tankalot !
My wife came across this thread from another forum, which was difficult to find given the thread title:
Basically, he was reporting differences between his boot chip, 128M, and others' boot chips, 64M. He was also updating IMVE and getting Error Code 1 (again, similar to the screen cap I made above). He was convinced that was the issue but never posted the actual resolution.
On my game, with the 128M boot chip factory installed, the game would try to erase 134 Million bytes (?) of memory, and would fail at around 69 Million bytes. The reason my TWD boot chip didn't work was because it was the same 128M. The chips were functional. I think the problem was that the boot chip was expecting to see 134M of memory (if this is what that means) and was only seeing 69M. It couldn't finish its complete 134M operation, so it errors out.
Going back to the thread, I just happen to have an XMLE (2012) lying around, and thought that it was a similar era of the OG IM (2010), and I knew that my USB drives weren't the issue because the game never even got to accessing the data on the drives, it would error out before that, so I decided to swap the boot chip from my XMLE. With this chip, it was only looking for 33.5M of memory to flash, and seeing that the update file was only ~29 Mb, I was hopeful. And it worked! It completed its 33M erase, then proceeded to update the 29 Mb file successfully. I flipped about a half dozen games last night afterwards.
Pic of the operation with the 128M boot chip
Screenshot_20200423-222539_Video Player (resized).jpg
Pic with the XMLE boot chip
Pic of the file upload
Pic of the actual 128M boot chip
Pic of the XMLE boot chip
Hopefully this will be easier to find for those that encounter this problem in the future, given the thread title. I was getting really bummed out after a while but glad I was able to resolve it.