Thanks for the suggestions. I've tried all of them - different batteries (although they only last about 30 sec each), no battery, PRAM reset and PMU resets. Plugged in overnight, cold boot, etc.

I'm positive its an OS 9 issue. Its happened before - I installed OS 8.6 onto a USB drive via an iMac and used it to boot an iBook and got the same problems.... also had that problem with an iBook clamshell... Both times, reinstalling from OS 9 solved it.