I've got an issue too, I have it wired up, I'm 99% sure that it's wired correctly. (accounting for .09% chance of counting wrong, and a .01 chance of gremlins)
What happens is that it loads up and flashes back and forth between please insert disc and reading disc, the button doesn't effect it.
Tested it with a multimeter too, switch is fine.
I have a feeling that it is latency, measuring from the header through the adapter, through the ffc cable it's approximately 6 inches.
EDIT: There's a very faint blue flicker on the led on the wiikey when the reading disc message pops up. I also looked at some pics of other peoples wiikey setups and it looks like their wires are way longer than mine, so it's probably not latency.
EDIT 2: Yea just checked for the 4th time and the connections are good, a properly formatted wbfs sd card with swiss and 1.5 software on the wiikey, and the wiikey works with a normal wii no sweat. Still a small blue flicker on the wiikey light.
EDIT 3: opened a dol-11 cube and tried it, same error