The Error signal pin is a strange beast that is both an output and an input depending on the state of the drive.

When you measured 2.5 volts on pin 5 of the G320X was it also connected to the Masso controller?

On the original G320 (not G320X) the internal source of +5 volts fed to pin 5 had a source impedance of about 1000 ohms and this voltage could be lower if significantly loaded. The newer G320X was redesigned using a CPLD device that only supports I/O voltages up to 3.3 volts and that may have caused a change that is not correctly reflected in the documentation. If this is the case it may be possible to avoid the problem by connecting a resistor of about 10K ohms between pin 5 and the Encoder +5 supply pin. Hopefully this will pull the signal up to 5 volts without supplying enough current to override the power on condition that holds the drive reset until a low impedance source of 5 volts is applied.

Also note that the G320X has a feature that allows pin 5 of all drives to be directly connected together so that if one drive faults, all the others are held reset.