I agree, this should work and something's definitely wrong - and my guess is it's the USB 2.0 PCI card. I've run into this problem before with PMG4's, not working right, kernel panics and such; and following standard troubleshooting procedures I'd remove PCI cards and add them back one by one. It's been a while since I've tinkered with my G4's, but I seem to recall identifying a PCI USB card as the culprit on more than one occasion. IIRC it's something you wouldn't notice by just testing one card at a time, it's the
combination of cards that caused the problem. I'd remove the USB card and
voila! - things just worked. My guess is some things just don't play nice with each other on that single PCI bus.
@MacFoxG4 , if you haven't already done so, remove that USB 2.0 card, remove all peripherals except a keyboard and mouse, and see if you can get your Sawtooth to work with a FW800 card. If that fixes it, it doesn't necessarily mean you have to choose between USB 2.0 and FW800, it probably means you need to try a different USB 2.0 card.
My only other suggestion would be to boot your Sawtooth into target mode, connect it via FW400 to a newer PPC Mac that has built-in FW400
and FW800 (any G5 or the latest PBG4s if you have one), then boot the newer Mac from your Sawtooth's drive via FW400. Once booted, try connecting something to the built-in FW800 on the newer Mac. If it doesn't cause any problems, then you've at least determined there's nothing amiss with your Sawtooth's OS install, FW800 should work with it. That doesn't tell you much but it's a start: at least you'll know the problem is somewhere in your Sawtooth's hardware or the PCI cards' hardware and/or their associated drivers.