Crikey, having never had an HDD setup on my A500 it's difficult to advise here, other than to suggest unplugging everything and checking SCSI ID settings etc.
Sorry to ask a dumb question, but you say drive 1 won't boot if drive 2 is disconnected, right?
And plugging in the CD-ROM causes the machine to freeze?
Hmmm. You do say that you can't run the dataflyer utility unless you boot from the floppy. Have you installed the dataflyer program to the Workbench HDD? If it's not in the startup script then chances are the program isn't running after bootup.
The only other thing to check (I'm a SCSI novice) is that the correct SCSI standard is being used on all drives. If the dataflyer supports SCSI II (or whatever it is) then you might check that all the drives attached in the chain are the same standard?
Sorry for the crap advice, but it's all I can really think of!