Thanks for all the replies. I've been able to try some of the suggestions.
Fusion, 3.2, just spend ages trying to load the HD image without getting anywhere. Confusing configuration too.
I've tried installing with no network component that i could chose in the MacOS setup, but wouldn't skiping the extensions be as affective? Though, no luck.
I grabbed the 060 utility from phase5.a1k.org, setting NOSUPERSCALAR. It didn't help, unfortunately.
All rom updates are stored on my DENEB

Holding down L-mouse button to disable them had no affect. I also tried a clean OS3.1 install and just enough libraries needed to get ShapeShifter going, still no good.
All the various MacOS8.1 installations I've done works well in ShapeShifter/E-UAE, but all fail when loading Finder in BasiliskII (also failing in MacOSX) or ShapeShifter.
I'll just continue with System 7.5.5 for now. Maybe MacOS7.6.1 would work, if only I could find anyone selling it.