From the pictures you posted, obviously the iMac is displaying Single User Mode or Verbose Mode, rather than the normal desktop. So something maybe screwed up with the system files, preventing a normal startup. Here's what I would try:

Restart the iMac, then press and hold down Apple + Option + P + R, to reset the P-RAM. Hold those 4 keys down until your hear a 3rd startup chime, then let go.

Next, immediately press and hold down Apple + Option + O + F. This will get you into the Open Firmware mode. Type in the following:

reset-nvram (press Return)

set-defaults (press Return)

reset-all (press Return)

Then, insert the OS X Install CD (Disc 1) and either press and hold down C to boot right off of the CD or press and hold down Option, select the OS X Install CD from the list and click on the arrow pointing to the right to boot of the CD.

If if the third step doesn't work, you may need to have the Mac's ROM upgraded to version 4.1.9f4. To do that, it needs to have the OS 9.2.1 or later Install CD, install OS 9, copy the v4.1.9f4 firmware updater to the hard drive from the CD, run the update and then try booting into the OS X CD again.

73s de Phreakout. :rambo: