Thus, from my experience (my old ccr600 used to suffer this all the time), I reckon the issue lays in the HU
I can rule out the head unit 100% as we don`t use head units here to fix and test them !!
What you are seeing though is when the head unit initially talks to the changer, only then will the cartridge detection switches and sensors become active and determine whether the changer can be played. If it determines that a cartridge is not loaded, then it will come up with the error of NO MAGAZINE and it will the revert to playing tapes. This is very different to the error of NO CDC which can indeed be a cause of head unit and software failure where the changer itself cannot be seen.

The error msg quoted was NO CASSETTE (or NO CASS I suspect), not MAGAZINE (meaning no CD Mag loaded on these units). The CCRx00 don't give a NO CDC error, if its not happy with the CDC, it just ignores it.
The Source selection button - 0 - flicks between sources, in this sequence - Tuner > CDC > Tape > Tuner etc.
In the case of this error, in my experience, the HU doesn't realise it has a CDC attached, thus 0 button goes Tuner > Tape > Tuner etc. So pressing 0 in this scenario, it tries to play tape (which it will if tape is in there, else give NO CASS).
Turning HU off and on, allows HU to see the CDC again, thus back to Tuner > CDC > Tape > Tuner etc
Does that make sense?