Not sure what you are trying to do here. Unpack the lha-file to any location on your harddrive (on the Amiga) and run the game.
I am trying to run it on the FS-UAE emulator. Usually when dealing with HD install games it's enough to mount the .lha file as a harddrive, and specify the executable in the WHDLoad parameter line. In case of Shadowmage, I get an error when trying to do this. And yes, the game runs fine if installed on the real hardware. The reason I want the FS-UAE to be able to start it, is because I'm using an external game library launcher.