IIgs and a vulcan drive

["Pentium" <ballsandy@msn.com>]

I recently bought a nearly complete apple IIgs and I am stumped at
booting it.
The internal 20 mb vulcan drive is installed properly but the system
cannot boot from it.
If I insert the first of the seven gs OS 6.0.1 install disks, the
floppy loads I get in a window:

Disk EE1 may be damaged. Please move data to another disk.

I first suspect a crash (value village is as gentle as a bull in a
china shop) but I can still view the files in the drive. Another
window then pops up:

Unknown error #$005A

Now the insaller can't see the drive unless I quit and look in the
system 6 program launcher. I select the disk and get the error:

Block number too large($5A)

...and return to the launcher.

If I use the system utilities floppy and look in slot 7 disk 1 (the
hard drive), I can see files. Lots of files.
Some of the names look a little strange and I don't yet dare to try
renaming them yet (i'm still reading the prodos manual).
How should I backup? Fix? locate the driver?
Massive amount of floppy swapping and transferring over to my LC III
hard drive with a Prodos partition?
I really don't want to format the drive, there is still goods in it.