if you ask me its a software limit put in place in OS X by Apple to try to discourage you from installing OS X onto it and to try and force you to buy a new Mac, its Apples tactic. i had OS X tiger installed on my 120gb HDD (it has 3 partitions and i could instal and run OS X from any of the 3) in my Beige G3 AIO thanks to Xpostfacto and it allows you to install and run OS X on a HDD or partition (dont have to be the first one either) bigger then 8gb. normally when installing OS X jag on the Beige G3 you would see you could only choose the master drive if it was 8gb or smaller, or if the partition was the first one and 8gb or smaller.

i also used Xpostfacto to boot the tiger CDs from my external Lacie drive (which is SCSI) to install OS X on my Beige G3 AIO.

Xpostfacto removes many limits but also using it adds limitations to OS X that i have found. mainly in panther and above, dont know about jag tho cause i never had to use Xpostfacto to install jag, it always worked after a bit of tinkering with the HDD jumpers.

While my G3 MT has a Rev2 ROM which does support slave drives, I think the motherboard is a Rev 1 which does not.
Somewhere in my office I have a Rev 2 board with a 333mhz processor on it. Once I find it I'll give that one a try.

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even if the mobo is a rev 1 you can still fix it by putting a rev b or c rom in it and it will fix the no slave drive issue. cause it was the roms fault and not the mobo.