Danke fur deine interesse! 
Kein Problem.

So, can I turn the jumper on the hardrive to provide power for both drive and controller without any electrical/electronic damage?
(don't know if the controller gets power for the terminator)
Yes. Termpower that is, it's the only power distributed on the bus. Regular power needs to be supplied from the PSU.
One more thing- WB works fine on the disk, playing black crypt, hired guns (install from a floppy disk) etc. also, when copying/extracting from floppy also....
So, you have zero problems using the HDD alone, floppy alone and both in combination? Then probably the CD drive is the problem. Tried copying some files to RAM:?