How do I make an AppleScript use a Folder in the Contents of a Bundle for an alias on the Desktop?
You don't need to tell Terminal to run the script (unless you just want to lay eyes on it). But also you'll want to use a posix path escaped to prevent errors.

You could do it like ...

set myRes to alias (path to me as text) &amp; "Contents:Resources:"

tell application "Finder"
     make new alias to folder (myRes &amp; "Pass-Through Drive") at desktop
end tell

set posixRes to (POSIX path of myRes)

do shell script quoted form of posixRes &amp; "BasilliskII --config " &amp; quoted form of posixRes &amp; "basilisk_ii_prefs"

tell application "Finder"
    delete file "Pass-Through Drive" of desktop
end tell