Your kickstart revision is fine. It has scsi.device (IDE controller device, yes, not SCSI) in the rom.
I suggest looking for another 2.5" hard drive, and while you're at it, get an A500/A600/A2000 3.1 rom too, and if you have the $$$, a high density floppy drive as a replacement for the faulty one would be nice too, but it's up to you. ;-)
There is a slight chance of the IDE controller being damaged, however there's also a huge chance of the 40MB hard drive just being on its last legs and not complying. It works in one Amiga, but not in the other...not impossible. Anyways, a bigger HD is a must (40MB is just way to small), so try and see.
I am confident that it will boot up, when installed.
Oh, and do you have 2.04 or 2.1 WB disks? You could try accessing HDToolBox and checking if Amiga detects the 40MB hard drive in it. Attach the hard drive to the IDE cable, insert the INSTALL disk (if you have it) in the floppy drive and turn on the system, and let it load the INSTALL disk.