my AC inlet is also metal, but the wall wart itself is isloated from ground.
So if your AC inlet is metal, isn’t that carrying one leg of your low voltage AC to the chassis? (can’t tell from the pics)
Power down and do a continuity check between the case and both legs of your AC input, one at a time. That would be my first guess…
Metal power jacks should never be used with AC, due to these kinds of issues. With DC a metal jack is a bonus since it carries the ground effectively to the chassis…
ok, I did the mod and it made some differene, but I am still getting 7VDC from the SID ground to the chassis. I think I am just going to have to live with it.
No no don’t just live with it! This is dangerous since some xformer designs can sink a lot of current…Let’s say your chassis is now connected to the hot leg side of the transformers output, and it comes into contact with anything on the neutral leg (most things in your house!), the potential -could- be full 110vAC depending on the transformer design. Seen this many many times with the coin op stuff, two games next to each other with one line cord flipped in relation to the other where they plug into the outlet. Both work fine, but as soon as a patron touches metal on both they get a full 110v shock.
Keep in mind it takes more than 7vdc to meltdown a transformer…you might want to see how much AC voltage potential you have there…
my encoder has no electronic connection with the chassis, and midi is optoisolated so I should not have any problems as long as an audio cable coming out of the SID does not short against the chassis. Its a weird problem, but everything works properly so I am just gonna roll with it for the time being.
We can get this through process of elimination, and I definitely would not run it until you have at least isolated the chassis. Next run might mean your SID chip not just another transformer… :-\
Another thing that’s not completely related, thought the MIDI is opto-isolated there is still a ground connection on the MIDI out, so an improperly wired MIDI cable (shield wired to ground) or non-standard MIDI ports on other gear can cause some real issues like wall wart supplies smoking (worst) and flaky MIDI data from ground loops (best).
More info on the power connection please! 
Best
Smash