Is it because I have connected the chassis/system ground to earth ground?
Yes. The 3rd pin on the power connector is mostly equivalent to the neutral line. The neutral line should be Earthed, but since it's done at some distance from the house wiring, and may have all sorts of faults, and since it carries the return current, and it's possible with some connectors to connect them backwards with neutral and live reversed, the 3rd pin is provided for things that need a safe Earth connection.
You could try powering this device from a GFCI as you are testing it. Instead of blowing your rectifier, you will probably just trip the GFCI until you get it right.