Original iMac, Its CD Drive and OSX

Okay, my little sister has had an imac since steveo first intro'd them. it chugs along and whatever. but her cd-drive got borked last year, and we brought it in for repairs. turns out to have been some kind of hard drive problem, not the actual cd-drive, so they gave us a new hard drive, with os8.6 though (and not osx, as we had had on it). the computer shortly gains a power supply problem (doesn't respond to the on button), and we delay getting it fixed, cuz they say it would cost a lot. fast-forward about a year, and my other sister is looking for a computer on the cheap. we bring this old imac to the repairshop, and the power supply gets fixed. os8.6 is on the computer again, so i guess they had to nix everything and reinstall, which isn't a deal, since not much was acquired. we bring the comp home, and attempt to install osX.

first, on old max like this one, osX requires the boot partition reside entirely within the first 8GB of the drive. so we have to partition it sillily. we get osX.1 on there, and all is well and good. restart, pop-out that cd and pop-in Jaguar. it starts into x.1, so i figure i didn't hold 'c' at the right time. i wait a bit, and jaggie doesn't come up on the desktop. i pop and reinsert it. it doesn't show. i try osx.1 (the disc we just installed), it doesn't show. system profiler shows the cd-rom in its list. i grab an audio cd, pop that in, it doesn't show up. i return the jaggie disc, and try restarting with 'c' again. it goes into osx.1. now, everytime that i'd put in a cd, it would spin, and try to access it, but the OS never showed it, and on startup it wouldn't grab it.

so, what does this sound like to everybody? to me it seems like osx(.1?) has a problem with her cd drive. but its really strange, cuz 8.6 didn't have a problem. anyone have any suggestoins for fixing it?

well, i've never heard of target mode, but I did consider copying over my entire hard drive (or rather, the entire 'System' folder) instead of doing a real install (before I had up'd it to osx.1). Does anyone know if jaguar really fixes this problem, because the imac is now kind of distant from my pmac, and bringing them together on a slight chance of it working doesn't seem all that inviting. As for the hardware test cd, I'm almost certain that its been lost by now (did the old mac hardware even come with one?).