Valet key - power key problem

[gmofjoint]

I just bought my 1990 ZR1. 58K, black on black.
The problem is as follows:
When I turn the Valet key from normal to performance, I do not get a light on the dash. I cannot feel any difference in the power of the car. I put a snap-on scanner on the car and placed it into data and drivablity mode. The scanner indicates that the valet mode is "on". It says this no matter which position the key is in. When I trun the key, with scanner hooked up, it goes from on to off only between the positions and only for a brief second. I cannot even get it to stay off, its that sensative.
So, before I tear into this, i thought i would get some opinions.
Key switch? light bulb in dash out? (this doesnt explain it being on all the time with the scanner) Fuses?
Any ideas? Thanks in advance