I have exactly the same problem with my Picasso IV and the 3.9 boot floppy. On all other occasions it works perfectly... every 3.1 boot floppy I've thrown at it works - just the 3.9 emergency boot that doesn't.
Maybe you can deactivate some modes/resolutions in the Picasso preferences program? Also, you can remove the PAL monitor in DEVS:Monitors and only leave NTSC and PicassoIV, maybe that helps?