My first guess is it's your floppy drive that's at fault, not the disk or the software.

This place will sell you a floppy with system software on it, if you suspect it is the disk that's the problem: http://rescuemyclassicmac.com

If you created a high density disk, and a Happy Mac appears when you insert the disk, that means the computer at least read the first few sectors of the disk successfully. So it means you have a high density drive.