The master drive is supposed to be connected to the furthest connector from the motherboard connector although this may only apply when using cable select. I know I had grief with the MK-III but it's so long ago that I don't remember if I resolved the problems or went back my old flat 40's.
You could try cable select. Here's the relevant extract from the Wiki.
"Starting with the 80-wire cable defined for use in ATAPI5/UDMA4, the master device goes at the end of the 18-inch (460 mm) cable the black connector and the slave device goes on the middle connector the gray one and the blue connector goes onto the motherboard. So, if there is only one (master) device on the cable, there is no cable stub to cause reflections. Also, cable select is now implemented in the slave device connector, usually simply by omitting the contact from the connector body."
