@Phipli Apparently the reason for its incompatibility with newer systems is covered in the ReadMe file for the
Macintosh Drag & Drop extension of all things. It isn't compatible with the 8*24 GC control panel, and will cause visual artifacts as you interact with the screen.
HUGE thanks to
@jeremywork who pointed this out in another thread, and it was something I never knew about (and would never had known about because I would never had thought to read the ReadMe file for the Drag & Drop extensions.)
So it may just work in 7.5, but you have to make sure to remove the Drag & Drop related extensions. I'm not sure when it was integrated into System 7, as I haven't really used anything past System 7.1.