Me and my students had this problem for about 4 months. For some reason, the printer would say that the 'center tray is full' even though the center tray was not full at all! I've tried resetting and turning off the printer, but nothing is working!
Have you updated the firmware?
If the firmware has been updated to the linked version, it is safe to say the issue is hardware and that the sensor is problematic.
I don't have a Phaser 7800 to check, so I can't state where the sensor is, it could be a light sensor, or a toggle switch, but it is probably visible and should move freely.