The combination of the 3 chips works basically as follows:
The PIC is sat BETWEEN the DATAIN and DATAOUT of the CDROM controller MCU (This controller is referred to as the 64/32 pin chip by peeps on this board) . It monitors the command packets allowing most of them to pass unmollested until the "Seek to protection ring" command is encountered.
This command nullified by the PIC so that the cdrom mech never actually seeks out to the edge of the disk (On a CDR this would cause problems as the laser tried to focus on unburned media).
After a brief delay , the 74LS "switch" is used to switch a dataline from the regular cdrom subcode data being sent to the saturn to an output from the PAL on the modboard. The PIC then uses 4 datalines to que a "Protection OK" packet in the PAL's internal registers which is in-turn fired out along the previously mentioned dataline over a hundred times (Overkill but i guess they wanted to make sure the saturn didn't miss the packet).
After that , the 74 is switched back to allowing the cdrom subcode data to pass freely and the PIC goes back to passively handling the I/O of the controller MCU.
... And you get to play your CDR copy of radiant silvergun
Addendum:
Of the 6 lines either passively or actively modified by the modchip:
1 Apparently clocks the PAL.
3 are for SERIN , SEROUT and SERCLK for the controller MCU.
1 Is the "spliced" CDROM subcode dataline.
1 is used to sync the RC oscillator on the modchip