Is your PSU strong enough? It might not be able to cope with the 1260 and the disk. Then again, it works when the 1260 is connected but disabled....
I don't know the technicalities, but maybe disabling the 1260 also saves some power?
If adding the SCSI-Kit causes a crash loop I'd definitely suspect power problems.
I used to run my 1200D + Blizzard1260 + External Floppy on a 500PSU. If you're using a 1200/600 PSU you definitely won't have enough power.
