I set it up like you said, 80 gb drive as master on primary bus, dvdrw as master on secondary bus with the os9 drive as slave to the cd drive. I made two partitions on the 80gb, one 8 gb and the rest of the drive as a second partition. I formatted the disk with drive setup and as mac os extended. I ran xpostfacto and started the install but when it rebooted it flashed "cant open" several times again just like before.

What am I doing wrong?

It has a rev. c rom.