It's hard to answer your questions, I'm neither user of set_mmu nor I have a Hades. :-) I would assume that MMUSETUP.CNF has proper setup exactly for Hades. Aranym uses a much simpler/more straightforward setup with this tool.
But from your description I'm quite confident this why you and TheNameOfTheGame are seeing the frozen dialog - too much ST RAM reported. So it is a bug in Teradesk.
EDIT: A snippet from the default configuration file from the package:
# This is the file I use when I want to split the Hades RAM into ST and TT
# RAM. Copy this file to the root of you boot partition and rename to MMUSETUP.CNF
# to use it.
and then for RAM size:
# Then we set up the block that define the TT RAM. I have got a total of 40Mb in
# my Hades, and when 16Mb are gone ( 14Mb = ST ram, 2Mb lost ) we subtract that
# from the total amout of RAM available. I use 40-16=24Mb ( I WANT MORE RAM!! )
# This is the only thing you need to change in this file.
So try that file and see what happens.