As Jubadub said, the reason to use BlueBox in DP2 is that it retains the Mac OS UI and UX (and thus graphical speed as well), while also offering some advantages over OS 9. I enjoy the file navigation in OS X, but I also enjoy the more spatial approach in 9 for some things. Rhapsody and the OS X DPs has a sort of mixture of the two that is really nice to use - you start in a column browsing folder viewer, but double clicking any folder will break out a new window and act like classic Mac OS file browsing. Having unix underneath everything is nice for me when dealing with file storage and organization. I also just like the quirkiness of it and feel that it fits my PowerBook G3 well.
I haven't had a ton of time to mess with this since my initial post - St. Patrick's Day always has me pretty busy, and then today the starter on my car died, so I'll be removing the old one and replacing it whenever the part arrives. Hopefully this weekend I can work on this some more.
What I did find out was that DP2 doesn't seem to create a copy of the BlueBox base image in a folder for each user like OS X Server 1.0 does. Instead, it creates an alias in that spot to the instance of the image that it copies somewhere else. I cannot for the life of me figure out where. The alias just appears broken under OS 9, OS X, and Rhapsody. I think it's saved at the root of the drive somewhere maybe, but I don't know for sure. I've done some decently thorough searching through all the files (including hidden ones) without luck. This makes it slightly harder to experiment on the system. If I run the update in the BlueBox image, I have no way to edit it after the fact, because I can't find it and copy it off of the drive to mount it! I can, however, mount the base image that it uses to create the individual user instances. Would it be valuable for me to upload that somewhere? I did try to mount and update that, then re-zip it, but that results in the MacOS app on DP2 to freeze before it even opens the window - worse than when I updated it from within the running BlueBox image which resulted in freezing at the Happy Mac icon. There are "Classic Support" files in there. I'm thinking I could try to just copy the one from BlueBox's original image in the place of the 9.1 one after the update. I don't know if that will allow 9.1 to boot or not.
I'm still thinking if there's some process to manually update 9.0 to 9.1 by just replacing all the necessary files, that may be the best route. I've never heard of that done before, but I don't see why you couldn't do it given how modular and straightforward OS 9 seems to be from a system file perspective.