Happy Mac icon is an indication that Startup Manager (in ROM) has found valid boot blocks on the startup volume, be that an HDD or a floppy disk. If the boot blocks, however, point to something distasteful, such as a corrupt or no System Folder, an unsupported System or something containing more than 2% fat (or less than 98% fat-free), that will be where startup ends. There will be no splash screen, no march of the icons and so on, and no appearance of the Desktop. It is good news that you could create a floppy with recognizable boot blocks, but SM dislikes something else about your floppies.
It is also good news about your potential access to a desktop Mac from which to try a SCSI Disk Mode approach. If, with that, you do no more than erase and format (with hard disk driver installation) the HDD of the 160 it will be an advance. You should then begin the installation of a System on the 160 in the normal way (ie from floppy disk) if that is possible. Installation of a System while the PB is being seen not as a PB but as just another HDD attached to a desktop Mac is fraught, in that the specific software for a PB will not be installed.
If the 160 has but 4MB of RAM, I fear that you are being overly ambitious in aiming to install 7.5.5. You will need lashings of VM, and even then the 160 will limp rather than run. I run a 160 with 7.6.1 and a 33MHz daughter card, so it could better be described as a 180, but it also has the max. 14MB of RAM, with which it is sprightly indeed. With 4MB of RAM you could well aim rather to reinstall 7.1 with the updates for 7.1.3, and retro-fit the
software from 7.5 that gives much of the look, feel and performance of 7.5. System 7.5 is not wildly different from 7.1, but it is bugsorted and given a more modern appearance as well as some improved features (eg several pieces of licensed shareware, and more rational management of Disk Cache). However, 7.5 needs much more RAM and hard drive space than does 7.1.
Lastly, the special cable (with HDI-30 connector) was not a throwaway note, and it must be the dark grey (not light grey) cable with all 30 pins to ensure that the PB is told to start up from ROM but not to try to load a System, ie to shut up and stay dumb while its betters (the 'host' Mac) do the work.
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