Hi, glad to be of help. This is definitely a passlock problem. You may need a new key lock cylinder or possibly a security module.
Try a 30 minute key relearn procedure first.
Here is the procedure for key relearn:
Theft deterent systems, relearn procedures
Passlock III Relearn Procedure
30-Minute Relearn Procedure
Use this procedure after replacing any of the following components:
This procedure is not available on vehicles equipped with EXPORT configured TDMs.
When replacing a TDM with a GM SPO Replacement Part, ensure the procedure to setup a new TDM is performed prior to the 30-Minute Relearn Procedure.
1. With a master vehicle key, turn ON the ignition, with the engine OFF.
2. Observe the security indicator. After approximately 10 minutes, the telltale will turn OFF.
3. Turn OFF the ignition, and wait 5 seconds.
4. Repeat steps 1-3 two more times for a total of 3 cycles or 30 minutes.
5. ignition OFF before attempting to start the vehicle.
6. With a master vehicle key, start the vehicle. The vehicle has now learned the key transponder information and/or the ECM has now learned the fuel continue password.
7. If additional keys are required to be learned, continue to step 7.
8. With a previously learned master key, turn ON the ignition, with the engine OFF.
9. Turn OFF the ignition and remove the key.
10. Within 10 seconds insert the key to be learned. Turn ON the ignition with the engine OFF. The vehicle has now learned the new key.
Here is some links and information to by pass the security system:
How to Bypass Passlock 2
Build your own instructions
The easiest way would be measure your resistance and simply put the same value resistor between your orange/black and engine side yellow, tape the yellow coming from the key side. Must be sure to be within aprox 5% of the measured value or it could cause car to fail to start with the key or the autostart.
When testing PkII you need to test the "key side" of the yellow wire not the engine side or non key side of the wire that you cut. The resistance is coming down for the key cylinder.
The best way to bypass passlock 2
There is three wires going to your key switch one is black one is yellow and the other is orange or white cut the yellow in half and strip back the black wire ,take the yellow wire from key switch side and wrap the wire through and around the black and that should get you started