Replying to a 4-year-old thread for documentation purposes, in case somebody else has the same problem in the future. For the IIGS to communicate with a A9M0106 Apple 3.5" Drive, or any compatible "dumb" 3.5 inch floppy drive, the disk I/O signals HDSEL and EN35 must both be working. Both of these signals come from the VGC chip, not the IWM chip like the other disk signals do. And neither of these signals is used for communication with 5.25 inch drives or Smartport/Unidisk drives. So if your IIGS suddenly won't work with 3.5 inch drives, but works fine with other drives, you probably have a bad VGC.
There's something very strange about both the HDSEL and EN35 signals: they both can potentially be short-circuited by a connected drive. EN35 is an output from the IIGS, but if you connect a 5.25 inch floppy drive, that pin is connected to ground inside the drive. HDSEL is also an output from the IIGS, but if you connect an intelligent drive like the Unidisk 3.5, that pin is connected to ground inside the drive. Either scenario would create a potential short-circuit between a VGC output and GND. Apple guards against this by putting a 470 ohm inline resistor in the path of each signal on the IIGS motherboard. You can see this on page 4 of the IIGS schematics. Note that EN35 is called 3.5DIK on the schematics.
The resistors limit the short circuit current to about 10 mA. Presumably that's a safe level of current for the VGC. So why are some people seeing this kind of VGC-related 3.5 inch drive failure? I've tried to help a couple of people troubleshoot this in the past few years, but I don't have an answer. Maybe 10 mA is a safe current level for a newly-made VGC, but a 30-year-old chip will have degraded silicon and 10 mA continuous current will eventually burn out the drivers for those pins?
@joethezombie if you still have that busted IIGS motherboard, and an oscilloscope or logic analyzer, I'd be curious to know what you see on HDSEL and EN35. You can measure the direct outputs from the VGC on the motherboard at test point TP153 (HDSEL) and TP111 (EN35). You can measure the voltage after the protection resistor at the external disk port, on pin 16 (HDSEL) and 4 (EN35). During disk activity with a 3.5 inch drive, you should see both signals switching high and low.