The power button turning the receiver off (standby in Onkyo's terminology) is exactly the expected behavior with 30842. It is sending discrete Off.

You are by no means the first person that has wanted to control an Onkyo receiver with a red OK/Select button remote, and I can assure you that 30135 (not 31035, BTW) does control the TC-NR3007.

Please assign 30135 to the AUX button (make sure you get two blinks), and check if the volume +/- button works while in AUX mode.

Once it is verified that 30135 does control volume. temporarily assign setup code 30842 to Aux. Assign 00051 to the Power button (not the red All On button). Make sure that you get 2 blinks when you enter 994, and after step 6.

00051 will provide a toggle function.

Finally revert to setup code 30135 to get volume control.

Edited to fix my mistake.