You can't use it to replace the floppy because it's an IDE device. Also, you can't boot from the LS-120.
If a CD2 uninitialised icon appears when you put in a disk, then you have a mountlist called CD2 in your DEVS: drawer for CD2 which is pointing to the SCSI device and unit that the LS-120 is on.
What happens when you try to format the disk in DF4:?
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moto