The result for me, was the same as when trying to start without the format:on line added. Mackie OS Loader... loading... and that blinking asterisk, later.
Does it boot from the floppy to this point with the format:on line added? You said something about a corrupt floppy... or was that the reason, and it did boot to this point with format:on added?
Unfortunately, I can't try this beyond this point, because the Win98-D8B computer no longer has the big BFC cable attached internally (and all the D8B power supply components removed, and the PC power supply replaced with a standard one).
...and my actual "in service" D8B doesn't have a floppy drive (I put a silent Noctua fan behind that opening, to help push out hot air... and all my fans have an external control to regulate their speed, so I can drop them to a point where I hardly hear them... that's why that extra fan in the floppy opening is needed, IMO).
I'm thinking that editing the floppy from a Mac might just not work right, but am not sure. Maybe you know someone with a PC with a floppy drive, where you could make that quick edit?
I'm pretty sure, that you would get a "format harddrive - all data will be lost" prompt "somewhere" when booting from the first floppy (I would have thought it's on a connected VGA monitor, but it could also be on the D8B's built-in display). It doesn't just format the drive without interaction, I think... if I'd think that, I wouldn't have risked my Win98 system disk to be formatted just now, haha

...but yeah, if the floppy route doesn't work out for you, the IDE-to-CF route, and writing arjepsen's disc image to the drive should work.
Again, best of luck with all of that!