Unplug the Tag and leave 232 connected. If all works then put an emitter on the Tag and try again.

Now, my reason for asking PEP1 or PEP2. When you said PEP2, my first thought was that you might have tried to simulate at one time and the only way to do that without using Jon Welfringer's SIM patch was to set each component to send IR only.

PEP1 had no real simulator so we were pretty much crippled there. That's why you've likely heard about the Base Station Mod and Barry Gordon's Pronto Debugger.