Are you sure you have the right CPU libraries installed?
You said you copied 68040.library and 68060.library from the Phase5 disk to your LIBS: directory, but that is not how you install the '060 CS-PPC. The 68040.library is a library to run 68040s, you have a 68060. You need to copy 68040dummy.library to LIBS:68040.library - all that "68040.library" does it to load in 68060.library which the 3.1 SetPatch didn't know about. It's all the readme/manual I'm sure.
InstallDisk:Libs/68040dummy.library -> LIBS:68040.library
InstallDisk:Libs/68060.library -> LIBS:68060.library
That's all from memory but I'm pretty sure it's right. Check on Aminet for newer versions of 68060.library too.
