After the startup chime do you get any icons or other noises?
Do you have your OSX disks?
If you boot the machine and immediately press an hold the Option key does anything happen?
Let us know.
So you have tried booting with the C key held down and the disk in?
Is that correct?
When you tried resetting the PRAM with CMD+OPT+P+R what happened?
This may sound stupid,However could you pull the hard drive from the machine then try to boot from the CD so we can see if it may be a drive failing or if it is the logic board.
This guide should show you the correct procedure http://www.ifixit.com/Guide/Mac/iBook-G3-12-Inch/Hard-Drive/50/12/
Let me know what happens.