odds are the VATS wiring going to the key lock cylinder are bad near the lock cylinder. its a very common problem with the VATS.
if that is in fact your problem, you can replace the lock cylinder and get 2 new ignition keys to match the resistor of your old keys but cut for the new cylinder.
or you can build a bypass harness to bypass the lock cylinder.
you can get or build a bypass module that would make the ECM think the VATS system is working, but you would also have to bypass the starter relay.
you can have the VATS removed from the chip by burning a new chip with VATS disabled, again you would also have to bypass the starter relay.
if you do decide to replace the lock cylinder, be certain to buy a Delco lock
cylinder. the aftermarket lock cylinders are trouble prone and won't last like they should. where i used to work at, we tried the aftermarket cylinders a few times and always had to replace them within a few months with Delco lock cylinders and keys.
2 good pages of VATS info and trouble shooting, http://www.thirdgen.org/vats http://www.thirdgen.org/vats_passkey_system