Could be a problem with no disk read serial data, check at Paula pin 37 using an oscilloscope. You should always see active data there while the disk is attempting to read.
Otherwise it could be a problem with interrupt 5, which is shared use for both disk read data and RS232 serial RX data. If you're able to boot from another source (A590), run a terminal program that uses RX interrupts (as opposed to polled I/O) and see if it can receive data or not. Term fits this category, but I don't think you'll run it in 1MB.
Check Paula is generating DMA requests - measure at Paula pin 12. In A4000, etc, there's always activity on DMAL, not sure if A500 is the same, it probably is. Else you should at least see DMA requests during floppy drive read.
Also check continuity of the three interrupt priority lines (IPL) between Paula and 68000. Check they're correctly pulled to 5V and not floating due to a damaged pullup resistor.
