Out of curiosity, how much data is on your SD card? I've found that >1.95 GB likely caused "Read Failed" errors in Dolphin debug. I've created an issue on Dolphin's issue tracker and they thought the best fix was implementing the SDHC protocol (although it would be in the distant future).
I'm only using 19.8 MB of the available 1.80GB. Even using premade packs results in the error.