Here's what I'd do:
1. Make a copy of your Install3.1 disk if you haven't already
2. Rename Install3.1:Libs/68040.library Install3.1:Libs/-68040.library
3. Mount about a 5 or 10MB RAD: drive
4. Boot from the 3.1 Install disk
5. Rename Install3.1:Libs/-68040.library Install3.1:Libs/68040.library
6. Install 3.1 to your RAD drive
7. Reboot from your main system drive
8. Copy the contents of RAD: someplace and call it AmigaOS_Setup or some such
9. Copy the Phase5 68060 libraries to AmigaOS_Setup/Libs, overwriting the old 68040.library
Now you have a clean install available whenever you may need it. Just mount that RAD drive, copy AmigaOS_Setup to it and boot from that.
As far as your cybppc.device not picking up drives, the first thing that comes to mind is the termination isn't correct or isn't working. Beyond that it could be any of several problems. If they're prepped properly, you shouldn't need to mount them separately.
Anyway, hope this helps.
