There is a bug in the board as it stands in that the IOCS line is not connected to pin 19 of U2 as it should  be. Just run a wire from there (or pin 2 or 4 of U1 to IOCS (pin 19) on U5 and all should be good.

There is also an interesting quirk that was rather more unexpected. The Z80 PIO watches for an M1 cycle when you do an operation and things change after the M1 cycle. It turns out the PIO looks for more than just M1 in order to distinguish IM2 cycles and behind the bus extender it doesn't see sufficient. In short Z80 PIO's don't work behind the extender.