This is an old post, preserved for reference.
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The Commodore 116 is one of the lesser known members of the 264 family of machines.
Diag 264 cartridge and see if it detects the problem.
Commodore 16K internal 64K RAM upgrade, cut the 5V to two of the inputs to the 257s and replace them with the additional address lines. See that C16 64K blog post for more information.