I can't help with all your problems but the floppy issue is most likely to be in the drive itself. When you say 'seeking' do you mean that the drive light is on and the head keep seeking? Maybe there's a problem with the disk presence switch? If you have a drive from any other amiga, you could plug it in in place to prove/disprove the drive is at fault.
Oh, and OS3.9 is the latest you can install without a PPC card. Classic workbench is also possible if that appeals to you.
You really need an RTG card for OS3.9 in my opinion though.
