it was a bad RAM IC. I swapped the RAM, and all is well.... This same card was giving me weird issues as well on the non-backlit, memory manager errors when going to about this macintosh. 

But the Backlit is capped at 8MB, while the non-backlit is at 9MB. My guess is the last MB of RAM is occupied by the backlight controller. 

Replacing the RAM IC fixed it all. My new PCBs will have a 7MB cap jumper. to disable the last meg of RAM for the backlit portable, if it becomes an issue.