OS 8.6 on a PB 540, even one with a PPC (603) upgrade (100MHz or 117MHz) is unlikely without special 'hacking'. Do you mean OS 8.1 and a 68LC040? That should not be too remote from the 68030 of the 160 to handle file decompression sympathetically.
Given that the 540 can write floppies satisfactorily, and read floppies written by other machines (eg commercial software disks) satisfactorily, suspicion now has to fall on the FDD in your 160. It may be misaligned (as they can become with age), or it may have had a misadventure when the power was interrupted by mischance, especially if it was reading at that moment.
If the FDD is off-colour, even sickly, your two avenues of advance at the moment are to remove the HDD from the 160 and erase/install a System in another PB—which seems to be only your 540 here—or to get hold of the 160's HDD in SCSI disk mode from a Mac desktop, which I take it that you do not have? Even then you would need the special DB-25 or CN-50 to HDI-30 system cable required (depending as the connection is direct or daisy-chained via, say, an external CD-ROM drive).
Replacement of the 160's FDD with a known good one would confirm/solve your problem, but they are not easily come by currently. You could trawl eBay, these forums and swap lists, but it is not going to be a quick solution. PB 160s are not hard to open and to work on if you have done it before or have adequate directions. Another possible avenue (which will not necessarily solve the separate FDD problem), is to send your 160's HDD to someone who can install 7.5.5 for you. With the PB operable you can confirm its FDD's status. Given that 14MB of RAM (4MB soldered-in and a 10MB expansion card) is the limit for a 160, what do you have now? This is a material consideration in installation of a System.
de
Given that the 540 can write floppies satisfactorily, and read floppies written by other machines (eg commercial software disks) satisfactorily, suspicion now has to fall on the FDD in your 160. It may be misaligned (as they can become with age), or it may have had a misadventure when the power was interrupted by mischance, especially if it was reading at that moment.
If the FDD is off-colour, even sickly, your two avenues of advance at the moment are to remove the HDD from the 160 and erase/install a System in another PB—which seems to be only your 540 here—or to get hold of the 160's HDD in SCSI disk mode from a Mac desktop, which I take it that you do not have? Even then you would need the special DB-25 or CN-50 to HDI-30 system cable required (depending as the connection is direct or daisy-chained via, say, an external CD-ROM drive).
Replacement of the 160's FDD with a known good one would confirm/solve your problem, but they are not easily come by currently. You could trawl eBay, these forums and swap lists, but it is not going to be a quick solution. PB 160s are not hard to open and to work on if you have done it before or have adequate directions. Another possible avenue (which will not necessarily solve the separate FDD problem), is to send your 160's HDD to someone who can install 7.5.5 for you. With the PB operable you can confirm its FDD's status. Given that 14MB of RAM (4MB soldered-in and a 10MB expansion card) is the limit for a 160, what do you have now? This is a material consideration in installation of a System.
de