We'll need a Mac OS emulator, the Magic Cap emulator, plus a bunch of support files. For this guide I'll be using Windows but you can do the same in MacOS and Linux.
Get BasiliskII, the Mac OS emulator from here: https://www.emaculation.com/forum/viewtopic.php?f=6&t=5282 (get the one under "Always start with this download", this includes all of the support files)
(For MacOS, go here: https://www.emaculation.com/forum/viewtopic.php?f=6&t=7361)
(For Linux, go here: https://www.emaculation.com/forum/viewtopic.php?f=6&t=6580)
Then get the most recent build at the top of the page, this one is just the executable.
To run the GUI we also need GTK: http://www.emaculation.com/sheepshaver/gtk+-2.10.13-setup.exe
Now we need an operating system. Get Apple Mac OS 7.5.3 (CD) from: https://winworldpc.com/product/mac-os-7/75
We also need Stuffit expander to extract the Magic Cap emulator: https://www.macintoshrepository.org/2475-stuffit-expander-and-dropstuff-5-5. Get the .dsk file, that'll be easier to work with.
Finally, get the Magic Cap emulator: https://www.macintoshrepository.org/1316-magic-cap-simulator-1-0
Extract the first Basilisk zip, then extract the second one and replace BasiliskII.exe with the latest version. Now install GTK.
Extract the System 7.5.3 zip to get System753.iso. Now run BasiliskIIGUI.exe.
Check Disable CD-ROM Driver, then Create a new volume. It should default to the BasiliskII folder. Increase the size, I used 256MB, then save it with the extension .dsk.
The first time we also need System 7.5.3, so click Add and find the ISO file.
Now go to the Graphics/Sound tab and adjust it to your preference. I suggest increasing the window refresh rate and resolution.
Next go to Memory/Misc and make our Mac more powerful. Increase the RAM to 64 MB, keep the model as a Mac IIci, and change the CPU type to 68040. It should default to the ROM file in your BasiliskII folder.
Now click Start and be transported back to Mac OS 7! It'll want you to initialize the disk we created, give it a name and click Initialize.
When you get to the desktop open up System 7.5 Version 7.5.3, open System Software Installers, and run Install System Software.
Click Continue, make sure it selected your disk (I called mine MacHD) as the destination, then click Install. It should go a lot faster than it would have been on a real Mac, and when it's done click Quit.
Go to the Special menu and Shut down your new Mac.
Run BasiliskIIGUI again. Now remove the System753 disk and add the Stuffit Expander disk. Start up and you'll have a Stuffit Expander disk. Open that and run the installer.
The defaults are fine, so click through the installer and you should end up with Stuffit Expander on your Mac hard drive.
Shut down again and we'll figure out how to get the Magic Cap emulator onto the disk.