When exactly does this happen during the install? Is it all the way at the end when you say restart off hard drive?
The error happens after I insert the disk, tell the Lisa to boot from floppy, and it grinds away at the disk for a bit while the hourglass icon is on the screen (so in other words, it doesn't get very far). Like you said, probably just a corrupted disk.
So this is a very subtle thing, but if you look at LOS booting very carefully, there are several phases. The very first one is that you'll see a small square appear in the lower left side of the screen, it's gray, like the desktop, but the bits are inverted. This happens right after the boot loader is done.
After this, the boot loader will then load the kernel. Well actually it will load something like system_profile.bt or system_sony.bt on a floppy, then after the kernel is up, it will also load some drivers and look at a system config file which will tell it what the desktop application to run is (vs, say, the LPW menu.)
Once the kernel is loaded you'll see the mouse cursor change to an hour glass I think, before it puts up the "Wait" banner (or warns that the disk wasn't unmounted properly and prompts you to run the salvage program.)
I'd first try this with a working LOS 2.0 or 3.1 or whatever so you can notice the stages yourself, and then retry it with that broken one and see where it dies.
Assuming you're NOT on Windows, if you recompile LisaEm yourself with --debug and --tracelog, it will also let you set the Throttle much lower, say to 1MHz.
Newer LisaEms also have a switch on the build command --with-trace-on-start which will enable the tracelog as soon as power is applied. (For older versions, you can change a #define inside of vars.h to do the same thing.)
Or you could, move the mouse over to the floppy icon in the boot menu, and right before you click on that floppy icon (apple 2) to boot from it, hit right click on the mouse, which will turn on the tracelog. Note that the tracelog will generate gigs and gigs of logs, however it will also slow down LisaEm to something like 500Khz. So you can use these mechanisms to slow things down and see where this disk goes bad.
Looking at the tracelog, you can also fish out what sector was last read from the floppy, and then use lisafsh-tool to figure out what file it was reading from, if it had the fileid tags (4,5)=bb bb, it was in the boot loader. (Sadly, I don't yet have code to get filenames from LOS 2.0 in lisafsh-tool, but I will eventually, but this would also be a way to go.)
If it's the boot loader that's broken, you're in luck as I have a tool that can be used to replace it:
https://github.com/rayarachelian/lisaem/blob/master/src/tools/src/dc42-copy-boot-loader.c - you could then use the USA LOS 2.0 version as the source of the boot loader and a copy of the broken LOS as the target and that will fix it. If it's some other file, you'd need to do a lot of manual work in lisafsh-tool to repair whatever was broken once it's narrowed down.
The tracelog itself will contain everything that LisaEm did all the way up to the crash, likely it will leave you in gdb/lldb when LisaEm quits, so you might see more info that way too.