Check to see if the footswitch (assuming there is an indicator led on the footswitch) matches that of the indicator on the front panel. Also confirm the midi channel is in the correct position (set to 0).
Have you tried disconnecting the footswitch? Do it with the power turned off. Turn it back on and then see if the FX on/FS switch does anything. Without the footswitch connected. Doing this should place the midi controller into a different mode as there is no communication between FS and midi controller. If the FX loop works with the mini toggle in the on position, it may just be a minor thing that I would assume would be self correcting one you plug in the Footswitch again. Hopefully it is not a glitch in the midi firmware as I am considering getting the MKVII myself.
Another trick, you can use two cables in the send/return jack and leave the ends unconnected to anything. If turning on the FX loop with the mini toggle results in no sound (except noise from the cable ends) you would confirm the series loop is breaking the signal path. It is possible the cable end is not separating the built in switch. If that is not the case, looks like a repair for Petaluma to look at. Do not try to fix it yourself as that would void your warranty. Messing around with plugs, cables, disconnect of footswitch etc, even swapping preamp tubes will not be an issue as that is a self service thing.
