Well, first thing is that you didn't place the System Folder in the right place. It doesn't go in any "special" folder, it just goes in the Hard Disk, (root directory.)

If you can't boot from the disc, the copy probably wasn't done properly. You could try to make a disk image of it and try to "re-bless" the System Folder and re-burn it.

Btw, did you make sure to install Mac OS 9 drivers to the HD when you did a clean install? (That is, if you reformatted the drive as well.)