I've seen the cdev bomb on system 7.0 with a couple of strange
extensions running (fileguard, for one). I'm not sure if this is a 7.0 thing or a conflict. The init, however, runs fine. FYI, the bomb happens when you click 'Add…'.
If this happens to you, do the following:
Open the file "Incognito Prefs" in your preferences folder with ResEdit.
Open the Incognito control panel w/resedit.
Copy the TMPL resource to the prefs file.
Create (or edit) the 'HIDE' resource. This resource is simply a list of
creator codes for applications, with a count in front. Enter the codes
you want in here. Be sure to update the count field! If you need to create
the prefs file, it's type is 'pref' and its creator is 'HIDE'.