With 8MB, it might be best to stay with the factory install of System 7.1 + System Enabler 131. Its uses a bit less of RAM compared to 7.5.x. Your screen likely has the dreaded "floating" contrast issue. Its worse when using 16 grays mode as opposed to 1-bit B&W.
It shows up in a video I did of the machine:
It shows up in a video I did of the machine: