my theory is that for some reason, U26 (85F0464) isn't working correctly and is driving 0 onto the arbitration bus when it means to drive 2. so it thinks that it has lost arbitration, but it actually won it. then it hangs in a halfway state, and the DMA controller throws the timeout error (presumably by asserting NMI).
so i can confirm this by disabling the output driver (pin 12 of U37) for ARB1, which will allow it to remain high, so U26 will drive a 2 on the bus instead of a 0.
a little soldering work and a small piece of kapton tape, and i think we are ready.