Ok, took a step back and decided to start from scratch this time.
Fresh source, I decided to log the entire HDF mounting process.
That showed, it gets to the mountinfo geometry part of the code, then it would trash the Amiga memory and cause double bus error. So started looking at geometry values. Some of them didn't look right.
So we have it mounting drive, installing filesys, installing device, gets datapackets ready, then memory corrupts and then over flows, causing double bud error.
Started checking geometry code and altering some parts of it, as it I think its not reporting correct size of HDF. I chose a known working rom and non-rdb HDF. HDF is 20MB in size, keep it small and simple for now. Code seemed to be dividing blocksize to make it something like 120. This is causing it to be seen as 16MB.
I now have it starting to boot, no more double bus error, but PSP now crashes. However before it crashes, I can now see a new log. uae_start_thread, so its now crashing as soon as it starts hardfile thread. May sound worse, but it still looks like memory corruption, its just taking out PSP now.