My Quadra 700 was already maxed out when I bought it as a kid in the late 2000's at the Basel flea market (for CHF 10!). When I first booted it, I was a bit worried because the screen stayed black for so long...!
Did some more testing: Everything <= 8bit works in 640x480, even depth switching. Changing to 24bit causes the vncd to crash. Using the remote keyboard works. Pressing the remote mouse button causes the full Unix to crash.
I've tried reproducing this in QEMU with the image from the Garden you mentioned above and can't replicate the crash, so it's either something 700-specific or something in your installation. Is it possible for you to send me the precise image you're using? (When you have time, of course).