Here’s a link to Pictorial 3
https://photos.app.goo.gl/AqnqwzCZ4w3WWrVE6
Part A appears to be for older versions of the drive (I’ve never actually seen one of these). Part B is probably what you want:

The figure shows the correct configuration for a single drive (SY0: )
Note that things are counterintuitive in terms of the line select numbering. DS3 is connected, which will be seen as SY0:. Similarly if DS2 was connected it would be SY1: and if DS1 was connected it would be SY2: This is some kind of Heathkit quirk as I don’t think anyone else programmed drives this way?
So for your SY1: drive you want to follow the Part B example but break the DS1 and DS3 connections, leaving only DS2. Heath says to cut these but most us either just pulled the lead out and bent it or installed DIP switches. If you go the DIP switch route, be careful removing the drive as the DIP switch probably will add enough height that it won’t fit through the front opening.
There is one more step for a 2-drive configuration: there should be only one terminator resistor pack. That’s the DIP pack probably marked 220/330 just below the programming plug:

Only one drive should have the resistor pack installed and that’s the last drive in the chain. Basically the drive where the ribbon cable ends.
Try these settings and let us know if things work…
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Note that things are counterintuitive in terms of the line select numbering. DS3 is connected, which will be seen as SY0:. Similarly if DS2 was connected it would be SY1: and if DS1 was connected it would be SY2: This is some kind of Heathkit quirk as I don’t think anyone else programmed drives this way?
This arrangement was a Heathkit quirk. The standard Shugart definition that most other manufacturers followed (until the IBM PC floppy drive cable confused things) had DS0 through DS2 connected to cable pins 10, 12, and 14 respectively, with the assumption being that that logical drive numbering would start with DS0. Heathkit implemented them the other way around with SY0 through SY2 connected to cable pins 14, 12, and 10 respectively.