Wow. I forgot just how flaky my current BasiliskII setup is...
There's definitely something screwed up with that disk image. Maybe it's just me, but I'm finding that every application that's on that disk appears to have some corruption in its resource forks. (Every application has a generic "pencil on paper" icon, and if you try to open anything you either get a "The application program "X" could not be opened, because an error of type -39 occurred" message, or a nonsensical message saying "There is not enough memory to open "X" (zero K needed, zero K available). To make more memory available, try quitting "".". Interestingly some of the documents seem to retain at least part of their resource fork, because if you double-click on them they'll try opening the associated (broken) application.
This is definitely a job for someone with some deep arcane knowledge of MacOS filesystems.