You know, the education you got from the $40 UPS made you able to spot details on the $5 UPS you wouldn't other wise have known.
For $40 you got some "continuing education" and now you are a success in life.
Write a book so we can learn the secret.
Now forward the knowledge and recoup your money,sell it on Eblah,or better yet,Craigslist. Someone will buy it for 220v use!
That red lamp labled wire fault was probably showing the open ground since it wasn't plugged in. If you were to plug into an outlet that is not grounded (the 3rd pin) the light would most likely light up. It may even show reversed ground-neutral. Try Googling a user manual for it.
I Googled and this is from the MANUAL:
Lights when your UPS detects an electrical wiring problem, such as a bad ground, a missing ground, or reverse wiring. If this indicator lights, unplug your UPS and contact an electrician to repair the outlet.
Caution: If a wiring problem exists, your UPS cannot provide surge protection
Would seem the battery is in good shape so you got a deal!