As your first post identifies potential problems (possibly) with the power supply - have you checked to see that you have a correct source of +9V unregulated and +5V regulated from the internal power supply? The term "a bit o life" is not something that electronic components will recognise (!) They either have the correct voltage to function or they don't. The LED is a 'consumer' check that the power supply is "ON" - nothing more. As I have found on numerous previous occasions, the LED can be lit on these things but the correct voltage supply is not actually present and the electronics fails to operate as designed.
Have you got a multimeter to test the voltages?
Have you got the schematics (from e.g.
http://zimmers.net/anonftp/pub/cbm/schematics/computers/vic20/index.html) and do you know how to read electronic schematics? If you do, this will help...
One potential problem with 'old' computers is the potential health of the electrolytic capacitors. They sometimes go short circuit (usually with a bang if they are large enough!) and sometimes go open circuit - so they don't perform their intended smoothing function.
You can measure the voltage across capacitor C1 (4,700 microFarads). This should be round about +9V d.c. (Incidentally the component IDs and values will depend upon the specific 'issue' of the VIC-20 - I used the schematic I found at
http://zimmers.net/anonftp/pub/cbm/schematics/computers/vic20/vic20-left.tiff as my initial reference. If you can identify exactly what revision and/or assembly number your VIC-20 PCB is - this would help significantly).
You can measure the voltage across capacitor C3 (100 microFarads). This should be round about +5V d.c. (but could vary from +4.75V to + 5.25V).
If these voltages are correct - I would measure the voltages across the power supply pins of all the ICs next. Again, the schematics show which pins these are. This check is trying to rule out a faulty PCB track starving an integrated circuit of the power supply it needs to operate correctly.
This doesn't definitively prove that the capacitors are OK - but gives us a better feeling. You would (ideally) use an oscilloscope to monitor the power supply rails - but I assume you don't have access to any test equipment like this?
Once you have done this - and confirmed the measurements are correct - we can proceed to the power on reset (ICs UE6/UE3).
Dave