I tried cleaning the lens with a dry q-tip and it appears that didn't do anything. If you want, I can post a photo of the drive while it's open. It also appears the lens is all the way at the far end of it's mount. I don't know a TON about CD drive's but I know that it should start reading towards the center of the disk... maybe the head is out of alignment? I don't really have any spare drives easily accessible so I can't test out another drive.

I also do know the CD's work, I've used the OS 9 CD recently on an iBook and the audio CD works too.

Normally in this situation I could just fire up another Mac and install the OS via target disk mode but naturally this is one the last mac's before firewire became standard. :-/

Also on the "noise", I really think it's coming from the CRT. I hate to think it's going to have problems with the PAV board but that could very well be too. I've done a little research and I've read that it's typical for older iMacs to make this noise when they are off and I've also read it could be a sign of that board going out. I swore I'd never buy a first gen iMac G3 but it's looks almost new, I don't think it was used a lot.