I've had the same problem.
Using the remote from the DVD kit helped. The original Microsoft 'S' controller then was not plugged in.
Controllers with part.no beginning with X08 don't work always in FlashBIOS.
Part no.X09 are better for this job?
My config:
XBOX v1.6
Microsoft controller 'S' (part.no. X08-xxxxx)
DVD kit
Xecuter 3
FlashBIOS 3.0.1 / 3.0.3