As I recall the old OS the booting is in a generic 640x480 mode and then with the desktop all the fancy video stuff is on. If there is a missmatch between your card drivers and the graphical card. It would behave like that.
try booting with extensions of and see how it works with just the generic stuff.
That ixMicro Twin Turbo card you have might have trouble with some components of OS 9. If it boots to the desktop with the extensions of I would then boot from a CD and clean out the extensions from the system on the HD as well as any control paneles.
The fact that the booting sequence works sugggest that the RAM is OK and that the card is OK.

With some fiddling with drivers you should be OK. And if you just want to use it as a server you will not even need that.