I know my 500MHz G3 PowerBook from the same era CAN boot 9.2.1 off of a USB flash drive. What I'd do is just boot from CD and...

important bit here

use disk utility to format the usb thumb drive. You can only boot from it if the partitioning is laid out in Apple Partition Manager/APM format. (likewise, Intel Macs can only boot from a GUID partition.)

Install OS9 onto the drive.

Use the startup disk contro panel on the OS 9 cdrom to select the USB drive.
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