I wonder what changes there were between version 4.007 (which the hacked version is based on) and 4.008.
I searched for AMax IV on Google Groups and there are a variety of threads mentioning problems which may be similar to yours.
One thread mentions Workbench 2.1 being the last tested/supported for use with A-Max IV.
This one mentions pre-4.008 having issues with 68040s.
Also read through
this thread, you're probably having some of the same problems they were...
If you're able to boot System 7.1 after installing it, you could try installing System Update 3.0, maybe that fixes some Mac-side bugs? Boot with extensions disabled, I seem to remember that some cause problems (A/ROSE?).