I got a used copy of Steel Battalion about a year or two after its release. I recall it working back then and, as the novelty wore off and the difficulty sat in, the controller was disassembled and I moved on to other games. Later, I had modded my Xbox, flashing the Evolution dashboard onto its motherboard. I recall there being a problem with Steel Battalion; not wishing to obtain another Xbox or uninstall the mod, I resolved to deal with it later.
The beginning of the game has some cutscenes which cause it to freeze or lag, but those can be skipped; however, during the VT startup sequence, the Ignition button consistently resets the system. Trying this at any time will result in a reset. I navigated to the screen allowing you to test if the controller functions, and noted that all controls work save for the Ignition button.
Is there a way to bypass the Ignition button resetting my Xbox?
Pictured: Steel Battalion controller, By John Tregoning, CC BY 2.0. The blue Ignition button is on the far right, just above the red Start button.
With some research online, I was able to find a quick and painless solution. I'm posting the question and my answer not only to share my experience with a broader audience, but to allow for some other user with a better answer to come along as well.
It appears to be tied to the Xbox's modded firmware allowing for a soft reset. The original Xbox does not have much to do on the dashboard and did not come with a native reset; the developers of the firmware built this feature in, allowing for users to easily return to their more robust dashboard. Unfortunately, the Ignition button maps to the button combination for the reset. Whether this was intended by Capcom or not remains a mystery to me.
Posts on various forums as far back as 2004 indicate that pushing all the way forward on the right stick while pressing the Ignition button will bypass the mod's reset function. The problem and solution are even mentioned on the current version of the game's Wikipedia article, despite that probably not being the place for that information. I was able to confirm this works and proceed with the first three missions in the game with no further reset problems.