Hi Steve,
I don't know the answer to your problem but here is what I do know. The VATS system came out in the 1986 model year, however cars built in the final few months of 1985 are classed '86 models. An easy way to tell an '86 from an '85 is by looking for a high mount brake light up on the roof. '86s also had ABS brakes, a thicker steering wheel and, as you mentioned, a pellet in the key for the VATS system.
I have an '86 and have first hand knowledge of what happens when the VATS system plays up - the car goes dead - it won't even crank when you turn the ignition! The fact that you can get the starter motor to crank makes me think it may not be VATS - even if your car was an '86.
Also, if VATS stops your car from starting, you must wait several minutes (like 4 or 5) before attempting a restart otherwise it will automatically stop you for another 4 or 5 minutes. Again, the fact that you can restart after 5 or 10 second seems strange if it is a VATS issue.
My car will not start in neutral either, it must be in park. This may be a standard "feature" of C4s but I'm not sure.
A code 46 is indeed a VATS circuit problem - so I'm stumped!
I would probably start looking at the ignition system, maybe a lose wire somewhere? Dud terminal in the distributor or coil?