Yes, agreed on both counts: the 780 (and similar Pioneers) do have an auto chaptering option that rather stupidly relies on sensing commercial breaks, and yeah its absolutely useless: they shouldn't have bothered. The nonadjustable design of this auto-chapter system is very odd considering Pioneer generally gives you three or four different options for every other feature. Its really annoying you can only select "useless auto chapters" or "no auto chapters": even the lowly Magnavox allows a compromise choice of 10-minute "manumatic" chaptering on the HDD.
However funky, though, this "auto chapter based on alleged commercial break signals" setting would not cause the issue experienced by The Gears: it doesn't actually remove
commercial breaks, it just attempts to flag them with a chapter mark. It also shouldn't cause the unit to automatically skip
commercials during HDD playback, cause a video blackout of a couple seconds, or display an AUTO text label on screen. I think we still have a mystery here...