On the original Sega genesis model 1, the FM audio chip is the Yamaha YM2612. This is a digital FM synthesizer with an integrated DAC ( digital to analog converter). This DAC was the main flaw of this chip as it introduced a lot of noisy artifacts during the conversion.
The stand alone YM3438 chip ( or discrete ) seen above was never used in a Sega genesis console however. Instead Sega integrated the new YM3438 FM synthesizer inside a large general purpose ASIC, the FC1004. This chip was used in the model 1 VA7 and model 2 VA0, VA1 and VA1.8 revisions of the genesis console.
The important detail is that this circuit only works with the YM3438 ( ASIC YM2612 as Tiido put it back then), and not the discrete YM2612 of the model 1. The reason for this is that they have different type of outputs ( YM3438 is louder ). As a result this circuit was only to be used on model 2 consoles and did not work on model 1 consoles ( except VA7, which is basically a Model 2 in model 1 case ). This was not considered a major problem because the model 1 already had a decent amplification circuit. However those looking for the ultimate audio for the genesis would get a model 2 and a CCAM as this setup is much better than a stock model 1.
Now what if we swap the YM2612 in the Model1 for a YM3438?The two chips are pin compatible so in theory it is pretty simple to remove the YM2612 in a model 1 and install a YM3438 instead. But remember that the two versions of the chip output differently so If you simply swap them over your genesis 1 will output garbage as sound. The genesis 1 onboard amp is inadequate for the 3438.
AFAIK this problem had not really been assessed and documented until earlier this year when a few modders, EvilDragon and Drakon among possibly others got in their mind to make this work. This concluded with a YM3438 working in a genesis 1 using a modified model 1 amplifier.
While this experiment was successful in the end it mostly went under the radar and was seen as a curiosity rather than something actually useful. One of the main reason for this is that it was assumed that the Discrete YM3438 was significantly inferior to the YM3438 that is integrated in the model 2 genesis. In other words the the stand-alone discrete YM3438 was seen as pretty much an equivalent of the YM2612 while the true superior chip was the FC1004 found in the model 2.
The practical conclusion of this is that we can assume that the highest sound quality on a genesis is also achievable on a Model 1 machine and not only on the model 2. High quality CCAM audio is no longer something that should be associated strictly with a Model 2. The stand-alone YM3438 chip is just as capable of delivering quality sound as the integrated one.
HOWEVER, there is a later version of the Genesis Asic, also known as the GOAC ( genesis on a chip ) which basically integrates everything on the console in a single chip. The integrated 3438 on these does not suffer from noise issues. In fact they have the cleanest output of all the genesis consoles. These can be found exclusively on Model 2 VA4 and Genesis model 3 consoles. They however have an altered/wrong sound balance between FM and PSG so implementing the CCAM on those requires a little fix.
So I somehow found a post on sega-16 about a genesis with a resistor on the bottom with a cut trace, exactly like mine. I'm starting to think this was just some factory "fix" or "repair" rather than a mod. Second post has a working image link which shows the same kind of resistor on the same spot with the trace cut. 2b1af7f3a8