It seems that if your fob battery is totally dead, I cannot start the car, even if I insert the fob in the slot. This seems like a real weak spot- you could get stranded just for want of a 2032 watch battery. We have a 2005 with smart key, and currently it is such that even with a good battery, it will not start with the fob in the slot. If I hold the fob in my hand, it does start. Last night, my wife got stranded. After driving somewhere, and trying to return home a few hours later, it would not start. I tried myself with fob in slot and out, to no avail. I put in a new 2032 battery, and it started- but only if I hold it in my hand- not in the slot. Weirdly, I had replaced this battery a few days ago. I have seen a couple videos claiming that you can start a prius by holding the fob over the start button, even if the fob battery is dead. I just tried this on a 2005 and a 2007 (with good fob batteries) and it didn't work. I'd love to come up with a hack I could do that would let me hotwire it and not need the fob at all. So- I'm kindof in the fob of war at this point...
One more data point- the dash has gone out a few times on this 2005. I unplugged/replugged the 12v battery to remedy, but at least one capacitor is starting to fail. Maybe another is as well that is related to the fob?
Your FOB case has probably been changed out at some point in its life and someone failed to switch the rfid chip into the new case. The OEM case has an rfid chip that is attached to the case cover opposite the side that has all the electronics. When the FOB is inserted into the dash, it disables the wireless SKS and looks for the rfid chip signal. No rfid chip means no rfid signal means the car does nothing. If that's the only FOB you have then you better keep a fresh supply of 2032s available
The RFID chip in the FOB will allow you to start you car if the FOB is dead... The mechanical key will allow you to get into your locked car if FOB is dead. If car won't start with dead FOB, that's a problem not related to the design.
When the dash cap(s) fail for good, the vehicle will no longer be able to start, potentially leaving people stranded. Consider the DIY cap replacement, or the lifetime warranty and updated odometer over at : Prius Speedometer Replacement
The rest of your question is already well answered. As for this part: Those videos were apparently for Gen 3 & newer. They don't have a slot like the Gen 2 so the method is different.
Thanks for all info, folks! OK- I did not know about the RFID chip in the case - DOH! I did replace the very worn out case on that FOB- and I hope I saved the old one! If I buy a used fob, is there any way to reprogram the RFID chip to work with a different car? I did manage to make the chicken dance mostly work such that I got a used fob to work with a gen 2 prius, but it was never quite right.
It's a tiny little black rectangular block shaped thing roughly 3/8" long... You can reprogram new FOBs to your vehicle using chicken dance but if you program too many FOBs to a car it won't let you add more till you wipe the old ones using a special locksmith feature on techstream that they charge a monthy fee to locksmiths to use. There used to be a service in EU that for ~$40US will do some math with your VIN# that gives you a security key to gain access to that part of techstream, but don't know if they're still around.
The chicken dance will only work if you currently have a fully functioning FOB. The working fob has to be used SKS and in the slot as part of the dance.