You can use MacOS up to version 8.1 officially. I got it to run 8.0 but 8.1 doesn't fully boot. Probably some config mistake I made.
I have tried MacOS v7.5 (i can't remember the exact revision) with the latest ShapeShifter and i was disappointed by the slowliness of the whole emulation but especially the of graphics, although i'm using a gfx card with CGFX v4!... :-(
Would MacOS 8 run any faster? Are there any good tip to speed things up? (except of reducing the resolution/color depth, which is obvious)