Oh hell, I didn't think of that...sort of a chicken and the egg problem. When using unadf, the protection bits are not preserved, and since none of the files are marked as executable, they won't run.
Ok, so do almost the very same thing, except put a standard Workbench 2.x ADF in DF0, in step 7 choose DF0, and change the command lines to the following:
protect dh2:c/#? rwed
protect dh2:s/#? srwed
protect dh2:esq rwed
Now eject DF0: and reboot the emulated Amiga.
These commands merely mark all the executables as such, and the scripts in S: as such. One thing I'm not 100% sure on - can anyone in here remind me if libraries have to be +e? If not, then that's all that's required.