The default behavior that I see is that the pulse LED pulses until I try to program a chip, whether or not there is a chip in the socket. When I load the bootloader, the prog LED turns on during programming in addition to the pulse LED. The prog LED turns off after programming, and the pulse LED returns to pulsing.
Are you seeing any error in the Arduino window?
Are you programming chips successfully?
Did you make any changes to the ArduinoISP sketch?
What type of Arduino are you using under the ISP Shield?
I don’t suppose you have bridged D8 & D9 somewhere (maybe where the headers are soldered in)?
That might explain why the error LED would come on at the same time as the pulse LED.
Your post seems to imply that the error LED comes on instead of the pulse. I could only imagine the cause of that being in hardware if you had bridged D8/D9 and bridged R3/R4 (at the LHS – nearest the LEDs). In that case, if the error LED is red and the pulse LED is notred then you might see the error LED lighting instead. It would be pretty bright. Seems unlikely to get that combination of shorts thou’.
Otherwise the likely cause seems to be in the ArduinoISP sketch – did you use the stock version?
When you say “with the blink sketch” do you mean when you are using Arduino ISP to program the blink sketch onto a target chip by ISP programming? That I could understand.
If you mean that it happens when you have the blink sketch on the Uno then I’m utterly lost for an explanation.