Don't know why you never saw that message before, but it's true - the beige G3s need to have OS X installed in the first 8GB of the drive.
Re-partition the drive into two partitions - the first 7GB, and the second the remaining free space on the drive.
Then install the OS on the first partition. Use the second partition for file storage.
Re-partition the drive into two partitions - the first 7GB, and the second the remaining free space on the drive.
Then install the OS on the first partition. Use the second partition for file storage.