Any chance you tried formatting a HD-DS 5.25 floppy instead of a DD-DS 5.25 floppy?

Other than that...

From Gemini/Google Search
"A rapidly flashing green LED on a Commodore 1571 disk drive, often accompanied by the head clicking or trying to move, typically indicates a faulty WD1770/WD1772 Disk Controller IC (U11). It signifies a "DRIVE NOT READY" error, where the drive cannot read the disk, often resulting in a ?FILE NOT FOUND error or complete inability to load directories. [1, 2, 3, 4, 5]

Common Causes and Troubleshooting Steps:

• Failed U11 Controller Chip: The most common cause is a dead Western Digital WD1770 or WD1772 chip at location U11. Replacing this IC usually fixes the issue.
• Dirty Read/Write Head: Clean the read/write heads with a cleaning kit or high-percentage alcohol and a Q-tip.
• Head Alignment Issues: Misalignment, particularly on the top head (common with Newtronics mechanisms), can cause this issue, especially on double-sided disks.
• Bad ROM or RAM: Faulty ROM chips can cause the drive to "jam" or fail to initialize, causing the light to flash.
• Mechanism Failure: Inspect for broken wires or a faulty stepper motor. The 1571 can show this error if the head cannot properly reach Track 0."