I don't have an SE to try, but I think that sad mac error by pressing the interrupt switch at that point is normal. The interrupt handler that runs the debugger isn't set up yet. If I hit the interrupt switch on my mac plus while it's waiting for a disk, it shows the same sad mac error.

Bottom line, it's very likely a disk drive problem. Open the case and repair or replace the drive, or use one of the previously mentioned external drive options.