See Yeshurun v. 21 pg. 758-9 (available here > http://www.hebrewbooks.org/pdfpager.aspx?req=46427&st=&pgnum=758&hilite=) where he dis-credits much in Aharon Yellnik’s (preacher at a Vienna Temple in the second half of the 1800’s) sefer Beis Hamedrash and shows the foolishness of the chess-story. By the way, the only source Yellnik quotes (in his intro at pg. XXXI) for the legend is a book of folk-tales or ma’aseh-buch.
Unfortunately, the story has now spread to several other jewish-legend-style books (each with their own version) while providing Yellnik’s Beis Hamedrash as the source.