Can you put in one of those 16mb sticks and run it with 24mb RAM? Also you may have more success with bootstrapping it from 7.5 (and replacing the System file) rather than 7.1. This is going by LCGuy's posting here.
Also that CD was "Mac OS 8 Revealed" not Unleashed.
Also that CD was "Mac OS 8 Revealed" not Unleashed.