To confirm, it might be worth testing to see if it happens on a Power Mac.
I think you may be onto something! I just redid the test in my 6100 with ZuluSCSI.
There was one variable I changed. I used the 08.99 System Recovery 1 ISO, which has Mac OS 8.1. Luckily the 475 also boots from this same CD so I can still do an apples-to-apples comparison. No pun intended.
Anyway, I formatted both emulated hard drives with Drive Setup 1.7.3 and did the full install process of 7.5.3 onto the ZuluSCSI in my 6100. Sure enough, everything works fine across multiple reboots. If I hold C, it boots from the CD. If I don't, it boots from the hard drive. All three drives always appear on the desktop and everything seems completely normal.
Then I put the ZuluSCSI back in my 475. Lo and behold, it booted from the CD and nothing showed up on the desktop. I opened Drive Setup 1.5 and updated the driver on both drives and rebooted. Now it boots from the hard drive and everything shows up just fine. Holding C works to boot from the CD.
@CC_333, it's looking like you're correct. Drive Setup 1.7.3's disk driver works okay on PowerPC machines. Well, the 6100 anyway.
Now I'm tempted to repeat this entire experiment with physical drives, if I have the patience. I haven't recapped any of my CD-ROM drives...
Also on a side note, I think I figured out the 0000000F/00000003 Sad Mac after reboot I was seeing with ZuluSCSI. It seems to have been caused by my (silly in hindsight) choice to emulate a Sony CDU-8001 CD-ROM drive, which is what I was doing on the SCSI2SD. If I just let ZuluSCSI use its default vendor/product strings in Mac mode for the Matshita CR-8004A instead, I don't get the Sad Mac anymore. It fixes that issue on both the 6100 and 475. Actually, the 6100 even gave me grief on the initial boot until I stopped overriding the strings.