I have couple of suggestions: 1) look in the back of controller and see where it says part #. There are controllers with part # starting with "X08" has problem. Either try to use another controller that has part # starting with "X09" or if you have a dvd kit, use the remote controller to move the options 2) you might need to open up your console and see what what brand of memory it has so you can make sure what xbox version you have. If they are Samsung, then you have 1.6. If they are Hynix, then it's v1.6b. Xbox versions 1.6 uses flashbios 3.0.1 or 3.0.0 to flash properly. It has issues with flashbios 3.0.3. Xbox 1.6b however needs flashbios 3.0.3 and nothing else.
BTW, before you open up your console, try switching your X3 cp switches to off on off off off (where flashbios 3.0.3 is located) and see if you can pick your options with your controller. If you can, most likely you have v1.6b xbox.