On the screen in the upper right are your door switch position indicators.
If any of the indicator boxes on the screen have a white background with a black letter, that means the machine "thinks" that particular door is open.
If a box has a black background with a white letter, the machine thinks that door is closed.
In a normal condition. To configure settings or load software where the ekey is required. There should be 3 doors open. The top main door, the lower main door below the button deck, and the cage door is open (metal door on the brainbox blocking access to the secure USB ports.
So there should also be three boxes on the screen with a white background and a black letter showing on the screen indicating those 3 doors are open. If they aren't and the doors are indeed open. Something isn't right with the switches.
Remember that you can only connect the ekey to one of the two secure USB ports that are behind the metal door on the brain box, AND the light on the screen with the C must display a white background or it will be rejected and behave as you describe. If the C doesn't display a white background, or if you connect the ekey to the other USB ports on the brainbox. it won't work if the ekey is connected to the other USB ports.
The "Cage" switch, which is the letter "C" in the upper right on the screen. Doesn't show it's open on your screenshot. It has a black background and a white letter. That's almost certainly the problem.
If you have the folded paper in the switch, it should display as it is on your screen now, which will cause this. If you remove the paper, it should immediately light up with a white background on the screen. If it doesn’t show a white background on the C indicator on the screen, and the paper has been removed.
Slide the wad of paper in and out of that switch and it should change back and forth between a white and black background on the box with the C on the screen. When it has a white background, the machine thinks it's "Open" and how you need it to show. The box with the letter M for "main door" if I recall. Lights up with a white background when the main door with the main touchscreen is open. That must also be lit up with a white background. You should also have a 3rd indicator with a white background on the screen for the main lower door under the button deck being open. But if it isn't when the door is actually off, it won't block the ekey from working. But if either the indicator for the main door, or the cage door is not lit up with a white background. Or the ekey isn't plugged into the "secure" USB ports behind the metal door on the brainbox. The ekey won't be accepted. And would cause the problem you are experiencing.
I've had one time when the switches would not indicate the proper door switch states. It was an oddity.
But it was resolved by clearing NVRAM and SafeStorage with the diag key. Then rebooting with no keys connected. Then when I reached the screen you are seeing. They indicated the actual door switch status properly again.
But the C indicator has to have a white background, and the indicator that turns white when you open the main door must both have a white background to be able to do config changes and do anything that requires the ekey. And the ekey must always be plugged into one of the two USB ports behind the metal door. You can load software and games using any USB port. But the ekey must be plugged into one of the two "secure" USB ports to function properly.