Here's what I wound up doing and a question:
1. I reran vutape and adjusted VR1 and VR2 per instructions in the manual. Then I hooked up to my Mac and saved the starship tape audio (just sounds so right) to Audacity. It looked perfect and sounded clean, so it seems like OUT on the expansion is working well. I then played the .wav back over input to the PAL-1 and it worked flawlessly (I set full volume on the MAC side). So, it seems like IN and OUT are working and the cassette card works :).
2. I loaded up PLL SET from FBOK, hooked up PA0 to TIP on IN connector and ran per instructions. Stayed 7 (high), no fluctuation no matter how much I fiddled with VR2. Hooked up logic analyzer and saw oscillation between 165 and 172 us UP then DOWN. So it appears the program (PLL SET) is working on setting PA0, but dunno about read.
3. I tried Han's troubleshooting - reading 1742 for 87, but got C7 instead. I fiddled but got strange results - prolly related to the amplification issue. Will revisit.
4. Did a bunch more experimentation with save and restore with audacity on Mac. After I got it where I wanted it, I added in the cassette recorder. As it turns out, my nifty wifty CALIFONE has a massively amplified OUT (It's used in classrooms). So, I turned the volume WAY down (almost off) until I got a waveform similar to the Mac stuff. I tried saving and restoring the small VUTAPE program and yay, it 'worked'.
Mac recorded and played back stream:
Cassette recorded and played back stream:
I'm not entirely pleased and still have to check it with the longer program, but thought I would share progress.
Will