I've only seen an original Badlands machine once (at CGE 2001), but I remember thinking at the time that it was broken, because the shot lamp was always on.
From the schematics and the behavior of the ROM as it accesses the shot lamp hardware, it seems pretty certain that this is the 'correct' behavior for the game.
All the shot lamp tells you is that you *can't* shoot again for a short period after each time you shoot.
I suspect they had the more logical purpose in mind of having it light when you are *supposed* to shoot, but this made the game too easy. It would also take the fun out of it -- you'd just be watching the lamp and 'twitch' when it flashed on, instead of watching the way cool Japanese western scenes on-screen.
As for the custom laserdisc player commands used by the game, I was told by Ruben (of LaserAce fame) that they are used for quickly skipping backward to repeat a section of a scene. This behavior has been implemented in Daphne, and I've seen it work during the flying axe and bat scenes.
However, there are still a few bytes sent to the player on startup and during the game that are not accounted for. They are most likely a non-issue for emulation (such as detecting if the custom ROM is installed, or verifying status), but they *might* perform some game-related timing feature that we haven't figured out yet. Therefore, the 'unsupported command' warning message is still displayed on startup.
-Warren.