Sounds like weak laser that's probably on its last legs. Remember about tweaking the orange/white potentiometer below the laser head? That's probably this unit's best shot at getting it to read games, but in all honesty, unless it ends up being dirt-dirt cheap, I might give it a pass -- it indicates that the laser doesn't have too much longer to go before it goes kaputz.
Oh, and MK1 and MK2s have different laser assemblies so they don't simply fit each other. If you're trying to mix & match parts between the two saturns, go for an identical model.