XDelusion, have you tried booting up MacOS without extensions? If you hold down the shift key when you see the little smiling Mac icon, next it should open a picture saying Mac OS - Extensions Disabled. Hopefully this might help you boot into the OS without crashes, and you can remove the extension that's causing it to crash. Extensions are sort of like your WBStartup drawer, you just remove items from it that you don't want starting at boot time.
Other than that I'm not sure what could be causing the crashes. Do you have the hardfiles on a SFS, PFS or FAT partition? If you have it on a FFS partition it could be very slow, although I doubt it would cause crashes. You could also try the command "Addbuffers" to speed up the drive the hardfile is on, like this for example if the hard file was on a CF or SD card in the PCMCIA slot - "Addbuffers CF0: 1000" and you;ll have plenty of buffers and faster disk access. To be honest I'm not sure what the perfect amount of buffers is, but this works for me.