I had this exact same issue with a TEAC VCR a couple of years ago. The problem was the mode switch/loading motor. A new loading belt and new mode switch fixed the problem.
In this case, I would be pretty sure the mode switch is not allowing the mechanism to fully load correctly, hence the 'error' on the display. A new mode switch is inexpensive as a part by itself, but the labour involved by a workshop to fit and align it to the mechanism to it could be costly, but you can always obtain a quote beforehand; that way you can decide if it is worth getting the VCR fixed (because it is a combo unit with DVD player, I can totally understand this). As long as the DVD part works fine, you can go ahead with a workshop repair on the VCR, since this is a straightforward issue which is fixable.
It is up to you, you can always say no if the repair quote/labour cost is likely to exceed the value of the unit.
The good news is this 'error' with the VCR is easy to correct - in a workshop by a qualified technician. I don't recommend that you attempt to service this unit yourself unless you have considerable experience with electro-mechanical devices such as VCRs. These are complex machines, and the alignment of such requires an expert with service manuals, adequate stock of spare parts, and all the necessary equipment to do this properly. Hence why I suggest the quote.
You could clean the mode switch with an aerosol electronic cleaner (available from places like Radio Shack), but this will not last very long and is not reliable. Whenever this issue occurs, and the switch is found to be the culprit, it must be replaced/mech. re-aligned/re-timed; since these are not cleanable items as they develop high resistance on their internal contacts.
Fingers crossed that it is a cheap enough repair overall.
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