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If your OS disk is a DVD, and you have a CD-ROM installed, it's unreadable by the internal drive. You'll need to get an external Firewire DVD drive. Connect it, make sure it has power, then hold down the option key when you turn on the iMac. You may have to wait a bit for the DVD to read out, but you should see the DVD icon show up on the display. Select it (you may need to use the arrow keys), then press return to boot from that drive. A flashing question mark with no readable optical disk installed says either the operating system on the hard drive is corrupted or the hard drive is bad.
Hi, has this mini been opened up to add more memory?
I would suggest that before you conclude that the ATA bus is damaged, open the mini up and see if the ATA connector is still connected to the motherboard. (It's the same connector for both drives).
Sounds like the DVD has broken. I would suggest either buying an external dvd drive (either USB or Firewire) or you could replace the internal DVD drive see instructions at http://support.apple.com/manuals/#powermac
When rebooting press and hold the Alt key until it displays all bootable drives. Now insert your disk. If it works install Leopard from here. If not then your drive is dead or faulty and needs checking or replacing.