Thanks S8_UK. Those are good suggestions and I will check those for certain when and if I have to open the box.
Right now, I am on my final 'experiment' with this problem which I began only an hour ago. My Phatbox is mounted in the prescribed VW position, which is vertical on side of trunk. The distance between the rear panel of the unit and the floor of the trunk is the exact distance requested by Phatnoise for the install. I blame this mounting for preventing me from seeing exactly what was happening.
On a hunch, I dismounted the unit to take a very good look at the connector where it plugs into the back panel. To my great surprise, I found that the two binding screws that keep the connection together allow way too much movement of the cable. The screws bottom out before the connector is fully seated. They are too long. I'd say the cable is between a 1/16 and 1/8 inch from seating fully.
I saw a post here, somewhere, where a fellow felt the the mounting nuts on the back panel were not screwed in all the way which caused a similar symptom for him.
On very close observation today, I can say that with the screws as tight as possible (I even lubed the threads to make sure they were not binding) the connector moves a lot. My player was working and pulled the cable out while fastened 'securely' and I got the 'no magazine' message. I pushed it in fully by hand and the problem cleared.
I think I have made progress now in the diagnosis of this. Why these things always seem to happen after posting the problem is beyond me. I think it's the same thing of asking a merchant why the package hasn't shown up yet and then the doorbell rings.
I think that wiggling the cables while the unit was mounted prevented me from finding the problem. You can't see what the connector is doing very well. I wiggled side to side, which does nothing. Now I see when I PULL it away from the case, then the problem appears. I believed that the connection was tight, because the screws on the plug were very tight. I never did pull on it so far as I recall. That was a wrong assumption.
Now I have it temporarily mounted horizontally and the plug is held fast to the connector with strong rubber bands. It is working perfectly so far. If it continues to work for a few days, I will shorten the screws so the two connectors can mate fully and let it go for a few more days for a final confirmation and hopefully: success!
So my preliminary diagnosis for the cause of the problem is that the screws do not allow the connectors to mate. VW owners who have their units mounted like mine are cursed in troubleshooting this because they can't see the connection. If you just tighten the screws, they really do nothing. This was the loosest 'tight' connection I've ever seen.
If it fails again, time to open her up for surgery.