Just a quick note to let anyone following this thread know that I was able to resolve this issue by simply changing to another output pin. I was using output pin 3 and it was not working. When I moved to output pin 2 the system works as expected. Not sure if I damaged output pin 3 or if it was an out of box defect. Sending a M3 command to pin 2 will now energize the relay. When I was connected to pin 3 the relay was energized regardless of whether there was an M3 call or not.

One final question for [email protected]: Do you usually install diode protection when you use the OMRON LY2NJ relay? From the diagram on the plastic case it appears to have an internal diode but I'm wondering if the lack of diode is what damaged pin 3. If the answer is yes can you please advise how to wire it? Output pins 2 is optically isolated but I'm not sure if that provide protection from voltage surges.