Still working on this, spent all weekend debugging, still no luck. However PSPUAE is based on euae 0.8.29 wip3, now there were alot of changes in wip4. Alot of changes for filesys that fix alot of issues. This may explain double bus error on mount. So Im going to start fresh and merge filesys changes / fixes first. See if that gets HDF / Folders working.
Why I think this may be better idea, change log for wip4;
Filesystems being mounted twice(bug fix)
support for harddisk files(fixed)
geometry validation
safer open/close
better size handling
mount order fixes
Device timing and ordering fixesfilesys install timing
trap setup ordering
mount list initialisation
Broken delayed interrupt handling when JIT disabled (fixed)Filesystem code relies on;
delayed interrupts
IO completion callbacks
Any of these could cause the issue I have been trying to debug.
Very frustrating, seeing traps setup (all correct) and then double bus error.
Spent hours debugging to find out, the setup traps are never called. Even tried forcing calls to them, which also did not work,

. Even spent hours messing with boot ordering, hoping that would trigger traps.
If this works. I have a game plan on improvments. First will be to strip the entire source of everything we are never going to use. Not interested in bsdsocket, RTG, 030, 040, 060, FPU, MMU. Basically everything thats not realistic on PSP with its 333 MHz processor.
Once thats done, I will set about, optimising source with PSP specific stuff. Will also add Dynarec and Pseudo-JIT (as we cant have full jit). One that will make alot of people happy, I will switch audio to psp and include buffers. This should hopefully solve crackling sound.
I also removed threading, as it was causing issues, PSP does a sort of threading. Its a very stupid design, it starts a thread, if another starts it pauses other thread until that thread is finished. So not the threading people may assume, as I did.