It indeed looks like your installation is having an issue here ! However, Mac OS X cannot delete the data stored on a Mac OS 9 drive and both operating systems are designed to coexist and interact peacefully.
While it is difficult to know what happened, chances are that the issues you are experiencing are due to directory or drive damage and not to Mac OS X ( or Mac OS 9 ).
Any Mac capable of booting into Mac OS 9 should be able to boot from a Mac OS 9 CD, even if its hard drive is seriously damaged. Would you be unable to boot from a Mac OS 9 CD, chances are that your computer in itself is experiencing other issues.
May I suggest that you call Apple or post on the Apple Discussions ? That way, many experienced Mac users will be able to help you !