Suspect this might help:
Adding the 3.5 as a second drive worked fine as long as the cable remained straight and the Commodore 5.25 is primary drive. Trying to use a flip style cable results in drive not ready/floppy configuration errors and the like.
Back when this thing came out, most drives had 4 jumper positions to set DS0 through 3 and used straight through cabling. Using modern drives is a bit of a problem here in that they're set to DS1 and expect you to use a flipped cable to determine A: or B: The PC40-III I encountered, expects A: to be on DS2, and B: to be DS1 so flipping 0 and 1 as most systems expect, won't work here. Further, there is only one motor line on pin 16.... which should not 'flip' or move.
I ended up modifying a flippy cable to allow both drives to be set to DS1. Instead of flipping 7 wires/pins 10 through 16, only flip 3 wires 10 11 12. Then change the 5.25" to DS1 instead of DS2 and you can have either in A: or B: working properly.
I believe sometime after serial number 4500ish, Commodore revised the board to use the IBM AT/flipped cable, as the service manual suggests a revision 5 board has this scheme implemented on the floppy interface.
Only time I ever needed a logic probe to install a floppy drive!
All the best.
Stuart