prius will not go into drive unless obd2 codes are reset

Thats great AutoZone can read SOME codes. But, since they and you are not using Techstream, there are likely codes still being missed; speculated to be P0AA6, by the knowledgable Matt, based on your description of the non-starting problem.

Assuming you did not replace the battery with a NEW OEM HV Battery, you replaced the HV Battery w/ another used HV Battery.
You essentially replaced a worn out tire w/ another used tire; no surprises here.

People who swap modules or buy a "used/rebuilt/remanufactured/reconditioned" HV Battery, experience repeated and inconvenient failures for a multitued of reasons:
1) Gen2 HV Batteries/modules (MY 2004-2009) are 9-14 years old. The suppply of parts are getting older and less reliable. The original HV Battery on the car when it was new came w/ a 8-10yr warranty (CARB vs non-CARB State). This is by design. Toyota knows 8-10yrs is a long warranty that most consumers will be fine with, and very few premature failures will occur in that time that Toyota has to pay for.
2) There are very few quality "used/rebuilt/remanufactured/reconditioned" HV Batteries b/c there are few reputable rebuilders.
3) Many sad stories of people buying used to save money, but actually costing them more money and time in the long rung.
4) If you were getting rid of the car yesterday, this might make sense; would suck for the next victim though.

The car is worth zero to a few dollars. Why would I want to spend $1800-$2200 on a new OEM HV Battery?
1) Would you buy used tires for this car when you need to replace them? BTW, tire manufactures only have tires warranted for 5 years, for a reason too.
2) Current condition of car (reliability wise) and how much longer do you plan to keep it?
3) Time is money too; arguably time is more valuable. You can always earn more money (spend less, work more, pay raise(s), 2nd job, etc), but you will never EARN more time. There are only 24hs in a day, and we will all die at some point in the future.
4) Do you value reliability or enjoy inconvenient breakdowns?
5) You could always sell or transplant the pack into a younger Gen2 Prius or Gen3 Prius (but this will require module and case transplanting), should the car be involved in an accident or experience a prohibitive costly repair.

It is ultimately your car, money, and time. However, these are aspects many don't factor in when going used.

 

Nice!!

 

Yikes! Well, I guess that made it pretty obvious.

 

What could have caused these coils to burn like that?

 

I would suspect that heat and vibration caused a weak spot in the insulating varnish to rub/ wear through and... ZAP!

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It's a thing that eventually can happen, whether from heat, vibration, chemical action of the transmission oil on the insulating varnish, whatever. (The Toyota ATF-WS fluid is formulated not to deteriorate the varnish, at least not for a long long time. Kind of an extra part of its job description, since ordinarily transmission fluid just has to be a good lube for gears and bearings.)

Once any little conductive spot forms, it's just downhill from there, because it will turn some portion of the motor winding into an electrically closed loop. Nothing stops the progression then, not even being in neutral: because the MG rotors use permanent magnets, just plain rolling of the car will generate current in that shorted loop, even if the car's electronics are sending no power at all.