Your image is corrupted or written incorrectly. Ensure you used DD/raw mode, not ISO mode. The HMD diskette is a DOS image, not a bootable CD. You cannot burn it to a CD-R unless you use a specialized tool to create a floppy-emulation CD (El Torito).
This seemingly simple piece of software is far more than a diagnostic tool. It is a master key, a low-level interface, and a time machine all rolled into 1.44 MB of magnetic storage. If you own a classic ThinkPad from the late 1990s to the early 2000s—models like the 600, 770, T20, T23, A22, or X21—you need to understand what Version 1.76 is, why it matters, and how to wield its power. Thinkpad Hardware Maintenance Diskette Version 1.76