Should B1260 and X-Surf work if I install the MMU/68k libraries?
Yes, because the ACA500plus adds an autoconfig device with address $ee.0000. I don't have a B1260 to test, though.
I’m now starting to think it’s a connection issue
That would explain a lot of things - please push it all the way down and also tighten the stand-off feet. They will make sure that you're all the way down. I have just checked the QC photo of your X-Surf-500, and it shows that it was delivered with the screws pre-mounted and the feet in a small bag. We've had two cases so far where the screws were not pre-mounted, so I wanted to check