iBook G3 Freezing at Spinning Gear on Startup. Can you help me?

I recently bought an iBook G3 700MHz (the silver tone one) online, and the seller had Ubuntu installed on it. He described that he didn’t use Mac OS X as the installers froze. I thought I could fix this.

I then swapped the hard disk from my iBook G4 (with faulty logic board, and Leopard installed on the drive), turned it on, and it wouldn’t get past the Apple logo and spinning gear (the spinning gear would usually freeze at a point). Sometimes it would only get to the Apple logo on grey screen.

I then tried to install 10.1 (Puma) from CD with an Erase and Install, and it worked and booted fine.

I put my iBook into Firewire Target Disk Mode, and used my iMac G5 to install Tiger on my iBook’s drive from the iMac’s original DVDs with an Archive and Install without retaining user preferences. (I’ve done this numerous times with G3 and G4 iBooks with no problems).
The same problem – freezing at spinning gear. Sometimes the gear would keep spinning but the hard drive would stop any activity.

Now I’m stuck, wondering what on Earth is going on! This is definitely not the iBook G3 video card issue, I know the problem intimately and this is nothing to do with it. The only thing I can think of is updating the firmware somehow.

Here’s what I’ve tried on startup:
- Zapping the PRAM
- Starting in safe mode (shift key, maybe makes the gear spin for a little longer)
- Starting in verbose mode (no difference)
- Starting in single user mode (no difference)
- Removing Airport card
- Removing battery

Other notes:
- Startup disk chooser (holding option at startup) works.
- The iBook won’t boot the iMac’s drive when the iMac’s in Target Disk Mode.
- The iMac Hardware Test boots on the iBook, but gives says it’s unsupported.
- The hard disk is not faulty, the iMac boots the iBook’s hard disk without problem.

Thank you in advance for any help you can offer, I really appreciate it.
William