Did you try setting the Startup Disk on the iMac by launching the "Install OS X" icon when the DVD is just mounted as a regular disk (i.e. not booted from)?
How about setting the Startup Disk Prefpane to the DVD when booted to the HD, then reboot?
Boot the iMac into Target Disk mode. Put the PowerBook restore CD into the iMac. Then boot the PowerBook with it connected to the iMac, hold down the option key.
If everything works the PowerBook will ask what to boot from. If you boot from the Restore disk you should be able to install on the PowerBook.
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How about setting the Startup Disk Prefpane to the DVD when booted to the HD, then reboot?
And did you say the FireWire Target Mode works?
Boot the iMac into Target Disk mode. Put the PowerBook restore CD into the iMac. Then boot the PowerBook with it connected to the iMac, hold down the option key.
If everything works the PowerBook will ask what to boot from. If you boot from the Restore disk you should be able to install on the PowerBook.