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means the install program cannot initialize the disk

Consider upgrading.
Either replace the motherboard, cpu, memory and power supply in the original case, or move the RAID controller and disks to a new bare bones system.
SCO 5.0.6 (install all the...

I think you have a hardware problem.

defbootstr Sdsk=mdac(0,0,0,1) scsi.noscan wd.noscan

Disabling drivers with bootstrings (http://osr507doc.sco.com/en/HANDBOOK/driver_disable.html)

These machines have a Mylex DAC960 raid adapter in a pci slot. They also have two onboard Adaptec controllers (alad). If you are not using the Adaptec controllers then disable them in the CMOS. If...

During the setup you are asked questions about how the install is to proceed.
You should choose Fresh for install type as opposed to Upgrade.
You should choose Manual, full control/fdisk/divvy, ...

But what is the RAID configuration, and the state of the RAID (dead, degraded, online)

How many system disks does the POST report, and what condition are they in?

Try:
boot: defbootstr link Sdsk=mdac(0,0,0,1)

and put the mdac diskette in the drive.