If it truly is a damaged disk, you may be able to find a disk image in this massive list of old Apple software:
If you don't find it immediately in the "System" section, see if there is a model-specific package elsewhere in the site.
That site is a trip down Memory Lane!
"If the disk was used to install the first part of the software, it should not be damaged. I have tried making a copy of this disk with the same results."
Following re-insertion of the disk, the installer's progress has undoubtedly reached a data-compromised area on the magnetic disk, causing a read error. This would explain why a copy of the disk produces the same result. If the Restore Disk for your LC II contains OS 7.0.1, you can download it here. If you have installed a pair of 4 MB SIMMs in the (2) memory slots, you have 10 MBs of memory to work with and could run OS 7.1 or 7.5.x. OS 7.5.3 is available for download, but it's a 19-part download, with each part intended to fit on a 1.44 MB High Density Disk (which the LC II's FDD can't read). OS 7.1 was never made available for download by Apple.
Thank you all. I have tried both methods. I downloaded system 7.0.1, but i can not put onto a floppy from an OS9 machine. Any disk says, "Not enough space...1k needed." I have reformatted the disks with no success. I have even tried some brand new floppys. How can I get the file onto the floppy? Thanks!
In order to make correctly sector-copied floppies from System 7.0.1 disk images, either Disk Copy 4.2 (the Make A Copy button) or 6.3.3 (the Make a Floppy command in the Utilities menu) would be required.
The North American English System 7.0.1 images are packaged inside a larger smi file. If this creates a problem, one can try the British English version instead (separate small disk images).
When you are working on older macs, do not forget the external SCSI port. If floppy disks are giving you grief, you may need to look into SCSI Zip drives and Zip disks. Zip disks will work with newer USB machines and older SCSI machines. A platinum G3 can give you both.
If you are serious aboult restoring older macs, you will need to find more tools of the trade. Consider finding a user group in your area that can help you connect up with someone who has tools to work with. If you are in Washington state, we can tell you about a few places that still have resources.