I am wondering if the controller board on your floppy is toast. You wouldn't happen to have a spare floppy drive that you can throw on the cable could you? or replace the cable even.

I had a floppy drive (1.4MB) that I pulled from a failed SE/30 that I tried in a Macintosh Quadra for a friend to get OS 7 on it. When the SE/30 died, it was from a surge and it fried practically everything in it, including the controller board on the floppy. So the floppy responds with erratic commands, the Mac was waiting and it did the exact thing.

Check the floppy controller board for burnt IC chips, and verify it works on another machine. Failing that, swap with another cable/floppy drive and see.

pretty sure it's the floppy drive and/or cable.