It works on 3.2U doesn't it?
And what's Hackmii?
I was so close to finding a solution that the solution was inevitable:
A dude at GBAtemp.net pointed out a program called ShowMiiWads.
Turns out I was missing IOS35 (for custom channels) and IOS33 (for Virtual Console games.)
While it would be nice to run backups from the disc channel, I can now run Neo Gamma from the channels menu... which would give me more options than just clicking on a disc.
Now my Wii does 100% of what I would want it to do. Frankly I have no idea what benefits 4.2 could give me... especially since I don't have an SDHC card.
But many thanks to you for explaining a lot of the basics to me. :D
I now have everything I wanted functioning on 3.2U !!!