As mentioned previously, Apple has confirmed a problem where Mac OS 7.6. does not install on a Power Mac 8500 because the Installer does not correctly recognize the hardware. In this regard, Ray Hill suggests a possible solution: Use a utility called "Wish I were..." [18K] to change the Gestalt ID of the machine.
As stated in the Read Me file for the control panel: "The reason for creating this control panel was to assist individuals who install clock chippers, especially to Power Macs. Some applications (for example MachTen) use the response from the Gestalt 'mach' selector to determine a Macintosh's hardware type, and thus perform run-time configuration. Clock chipped machines may respond with a value that does not correspond to an existing machine (for example, a clock chipped Power Mac 6100 response as a 6100/80), and some applications may be confused. This utility can be used to force Gestalt to respond with an acceptable value, and thus the application will function correctly."
Unfortunately, the latest version of this utility only goes as far as covering the Power Mac 7500/8500/9500 series. I have contacted the author of the program for information about a newer version and where this utility is generally available, but so far I have not received an answer. In the meantime, you can download it by clicking here (I may eventually add this to the Download Library).