It's interesting that the installer says it can't work when OS X is present. Are you trying to run the installer while your machine has been booted off the drive you're going to install on? If so, restart directly from the OS 9 CD. I don't see why OS 9 would care that OS X existed on the drive, but it may have problems if you're not booting from the CD. Alternatively, you could install OS 9 on another hard drive and then simply drag it over to your regular drive. There should be no problem with doing that. (That's one of the few advantages OS 9 has over OS X -- working with OS 9 is much easier since it is consolidated in one true System Folder and it doesn't have privileges to worry about.)