This chip does work for probe/read/write/erase, after I switched to another level shifter setup on a breadboard[1].
[1] http://forums.parallax.com/discussion/160963/5v-and-the-propeller (7th comment with schematic. Textual description: 2N3904 transistor, 5V in to E, 3.3V out to C, 1kohm from 5V to E, 1kohm from 3.3V to each of B and C, one set each for CS,MOSI,CLK, I tested OK with 10kohm instead)
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