Adding output_perror(0) seems to fix the paper out problems:

Code
void centronics_luaprinter_device::device_reset()
{
        printf("DEVICE RESET CALLED\n");
        m_busy = false;
        output_busy(m_busy);
        output_fault(1);
        output_ack(1);
        output_ack(0);
        output_select(1);
        output_perror(0); // added paper out
}

So let's see if Geos 2.0 will print something:

[Linked Image from i.imgur.com]