The image is bootable. I think the issue goes back to the fact that the original desktop folder was stripped (possibly by ejecting it while mounted as the Trash folder was also missing). If I load/mount the image in OS8 or OS9 it will open the window just fine on the currently running desktop. But it won't do so on it's own desktop if I boot from it.

I added a "Desktop Folder" folder to the image to replace the missing one but I think it's not behaving correctly as a result. If I run Filebuddy and get it to rebuild the desktop it creates a "Desktop" system file. But even this makes no difference. I've also ran Diskwarrior on it to make sure there are no other issues.