The limitation seems to be a bit different between tray-loader iMacs and Wallstreet PowerBook. On my iMac, I cannot run Mac OS 9 from the second partition directly, only from the partition(s) below the 8GB limit. I have tried.
the OSX installer refusing unless it sees an 8GB first partition suggests the Wallstreet will NOT boot to OSX without having the partition.
The Mac OS 9 installer does let me install on the second partition without complaint, because it has not been programmed to look for this conflict. The Mac OS X Installer does look for this situation as a pre-emptive measure to prevent this problem from surfacing later. However, if you were able to bypass the check and install it on a bigger boot volume (as Devin MAY have done), I think it will work as long as all the OS components used at startup remained below the 8GB limit.
I do not know the technical details. It could be caused by the controller itself or the driver; I do not know.
However, if we are agreed that Mac OS X must be installed on a partition below the first 8 GBs on Wallstreets, then that's all that matters in this case. Whether Devin did or did not already partition his drive is certainly relevant, but since he tried other suggestions that did not work, I think it is relevant for me to bring it up as a potential cause of the problem (BECAUSE I don't know).