On the screen telling me to change to disc 3, I hit ESC and used change disk (ISO) to switch to disc 3. I've been using the run (ISO) and change disk (ISO) commands.
I completed disc 2 and used the option to save my game on the memory card before switching to disc 3. I started with epsxe 1.7.0 and had no issue changing from disc 1 to disc 2. I'm having the same problem a lot of people are with the black screen that occurs when changing discs.