Try booitng the Mac from the installation disc which was shipped with the machine,make sure to use the right disc( which was shipped with the machine). If the unit does not boots to the OS disc,then remove the internal hard drive and power on the machine if you get flashing question mark after start up boot chimme then it is issue with the internal hard drive. Please get backt to me with your observation if issue persists.
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With the OS X Installer CD in the drive, try booting your mac and holding down the option key immediately after you hear the start up chime. This will (hopefully) load a firmware boot loader that will show available start up discs. Hopefully the OSX installer will show up as CD Icon. Select the Icon with your mouse or keyboard and press enter to start up with the Installer CD. From the installer you should be able to erase and format the drive as Mac OS Extended before installing OS X.
If the computer still won't boot from the CD double check that it is a retail OS X installer CD. If your CD has "software restore" or "ibook restore" or any other varient of restore written on the label; or if it names a particular model such as "ibook install" or "imac install" it is not a retail copy and may not be a bootable disc. A retail copy will only name the version of the operating system followed by the word install written on it's label and usually have a brief instruction on booting from the CD by holding the C key at startup.
Try resetting the PRAM by turning on the iBook then holding option + command + P + R and wait till u hear another chime. If it still freezes, it may indicate an application may be causing it to lock up hold shift after you hear the chime to boot OS X into safe boot.