I ran into this problem when making 7.0 and 7.1NAD disks which pretty much have less than 10K free space, as a general rule.
Then I had a lightbulb moment: If I make a ShrinkWrap virtual disk, and it has like 4K free, and if the FDD has over a certain number of bad sectors, effectively reducing it capacity from 1440K to something like 1220K, then it won't "fit".
The dependency on floppy disks and SCSI hard drives is the major reason I like to avoid the 68K series, although System 6 support rocks. Although...the Platinum Deluxe storage method pretty much can make System 7.5, 7.6, or even higher Emergency Network Access RAM disk stuff. Using a CD-ROM or another Platinum Deluxe str("Storage Type") means that any HDD failures should be pretty much extinct.