I created disks from the image files.
boot floppy - bare.i
root floppy - color.gz
And I am using this boot floppy for installation so it's just after creating the disks. In case floppy is bad, I tried different floppies. It is also possible that something is wrong with this machine, I tried it on another machine with the same configuration. Created slackware 7 boot floppy too, but the same problem.