He didn't fix the bug; he avoided it by rewriting the boot disc from scratch so as to not use KOS anymore, because trying to figure out what KOS was doing wrong was too much trouble. That was a practical approach since the boot disc is a simple program, but rewriting DreamShell from scratch to avoid KOS (which I assume it is using) is probably not feasible.
I don't really think fixing the bug is that important, since games with streaming audio don't run well over the serial port, anyway. Even if you fix the boot process to remove the PSO bugs, the game is still going to freeze every 2 seconds as it tries to load the next audio chunk, which is infuriating. It's better to just get one of the superior GD-ROM drive replacements.