check the ribbon cable on the floppy. If its not connected 100% to the floppy or to the motherboard header, it will cause the DF0:
? thing to show up. There is probably a lot of dust/fluff inside the 20 year old drive. See if you can clean it through the floppy slot with a can of compressed air. Try some isopropyl alcohol on a cotton bud tip to clean the heads.
If it still doesn't work, the drive is probably worn and needs to be replaced. The drives don't cost much. Or you could just take the one out of the A500, or get an external one and boot from that from the early boot menu (hold both mouse buttons on power up).
Anyway its not a huge problem, as these days its quicker to get a PCMCIA flash card and with ADF's of games not hard to acquire, you can use whdload to play games off the hard drive.
