Is it possible that you're still connected to the slave device with your PC?
Espruino BLE devices can only have one device connected to them at a time, so if you're connected with your PC, the 'master' device won't be able to connect.
Also, if you stay connected with the 'master' you could change the code to:
digitalPulse(LED1, 1, 500); // light red if we had a problem
busy = false;
And you might be able to see what error it is complaining about
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