Hi carvedeye you on the right path dont give up! Sorry for my lack of reply it was a very long time ago I had afa os working.
As I try to remember I do recall something about different versions working. I will try to look on compact flash with it installed on this week as i know it still works on that

Where did you get the files you are installing?
As I recall I used the ones from the afa site. I do remember having to do something weird to get it work. Its just I cannot remember what that wired thing was lol.
looking at your startup
Assign >NIL: HELP: LOCALE:Help DEFER
Assign AfA_: Sys:Afa_os_libs ;
Should be
Assign >NIL: HELP: LOCALE:Help DEFER
c:Assign AfA_OS: Sys:Afa_os_libs ;
I think you missed out the OS on the assign and the location of AFA_OS in the commands folder C:
Oh I also remember that.
1) If it boots with those commands in the start up sequence its a good thing.
2) You can tell its working by loading up Afa prefs
3) Text under icons might not be visible as they are the default amiga text that is not trutype so cannot be displayed. They will display once you select true type fonts in prefs.