It looks a hardware problem to me.
Can you acces the floppy-station with operations like DIR... and does it show the directory?
Are you able to use midifiles from Hardisk ?
If your SD1 is still under warranty, let your dealer solve the problem.
If not, purchase a standard FDD drive and replace the defective one.
Replacing with 'original' Ketron (ALPS) drive will cost you lots of money
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Roel