My idea was to boot from the startup disk, create a RAM disk of about 2 MB, copy the extras disk in, and reboot from the RAM disk. Yipee! My floppy drive is now free for running programs/saving data!

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Well that isn't going to work given that Macintosh clears the RAM disk at shut down.

Why is this and is there anything I can do about it

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This information isn't that hard to find if you make an effort to find it -

http://support.apple.com/kb/TA21561?viewlocale=en_US

http://support.apple.com/kb/TA21631?viewlocale=en_US

The hard drive works occasionally

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You know the reason the hard disk doesn't work properly, but you refuse to do anything about it.