If I recall correctly, I used Drive Setup on the Mini CD to split and initialize the two partitions, then copied the OS 9 files from the CD to one of them. The other partition, I installed (maybe even reformatted?) with Tiger's CD version, Client. For whatever reason, installation hanged near the end of installing disc 4, so I was forced to shut it down, which then caused it to prompt me to insert discs 2/3/4 upon a reboot and attempt to reinstall all those, which worked this time. (I suspect it may be a bad HDD that I got, as it occasionally gives me I/O errors.) But after installing, I had no more problems like that: I updated Tiger to 10.4.11, then the security update, Java etc..
Not related to the internal HDD, but I DID have to use OS X's Disk Utility to be able to format an external 1TB FireWire-compatible HDD that I recently got. Whatever Driver Setup I had with OS 9 simply couldn't do anything with it. (Not until I formatted it from its non-HFS stock settings, at the very least. It is a somewhat recent LaCie drive.)
Also! Did you try choosing OS X from OS 9's own StartUp Disk menu, as well? Perhaps it could make a difference compared to the "multi-boot" option at startup?