I have watched this demo on a A1200 with a 68030 and some fast-ram using WHDLoad, without any problems. It was long ago and i was using an older version of WHDLoad. So perhaps the demo has problems with newer versions, although i doubt.
You say that every HD disk that you have tried failed even when you cover the second hole. Well, that shouldn't happen. They should have work like normal DD disks. I suspect that there is something wrong with your setup.