I recently went through this same scenario. In order to lessen the number of variables, I connected directly to the M1 serial port using a terminal program (PuTTY, Hyperterminal, SecureCRT).
From there, I was able to determine that only output from the M1 was working (ie nothing I sent to the M1 was being received) but I would see the XK ping command normally sent to the XEP by the M1.
Because I was chasing a recent “power event” (lightning), I figured the M1 232 RX interface had suffered damage. I ordered the 232 chip (Max Linear SP3232ECT, ~$1.35) and replaced it on the M1 board. This fixed my problem.
How did you change the 232 chip? Any tutorial?