1)
On which disk do you get the "could not init" error? The MacOS hard disk image? A floppy disk image? A real Mac floppy disk?
When do you get the error? At startup? At disk insertion (if removable)?
When you manually try to format a disk?
WARNING!!! Be DAMN sure you didn't - by mistake - enable the Windows partition(s) in the "Disk" section of Basilisk GUI!!! The MacOS hard disk image(s) should be on the LEFT side (INSTALLED disks) while the Windows partitions ("C:\", for instance) should be on the RIGHT (AVAILABLE disks) and should stay right there! On the left pane only the Mac hard disk images should be listed. If the Windows partitions are installed in the GUI, I believe that MacOS will not recognize them and ask you to initialize them. Be careful NOT to initialize the Windows partition or you'll lose all your data!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
To use a Mac hard disk image use the "Browse..." button to locate it.
2)
Apple gives away MacOS 7.5 for free. All other versions are retail (you could use them only if you bought them). I think that installing MacOS 8 over MacOS 7.5 would upgrade the system to MacOS 8 (although a fresh install might me better: you can then drag and drop documents and stuff from the old hard disk image to the new one using HFVExplorer). This gives you the option to switch back to a working 7.5 in case the 8.0 installation messes up somehow.
The latest version which can run on Basilisk is MacOS 8.1 (available as an upgrade from MacOS 8.0 only - not from 7.5.x).
Hope this helps
