Since you are using MacWorks, try using the Floppy Emu's Macintosh mode (rather than Lisa).
On this point, If I want to setup Xenix, Uniplus Unix, or any other non-Apple OS, should I be in Macintosh mode or Lisa mode? Yesterday I was trying to install both Xenix and Unix in Lisa mode and I was having some disk errors installing files from Xenix floppy images and a couple issues getting Unix to finish installing. Not sure if it's me, the disk images, or the floppy emu :/