If your iBook's the same as mine, you've got 5 install CDs - 2 OS X CDs and 3 Software Restore CDs. Boot off OS X CD 1 and proceed through the install, when you get to the screen asking what drive to install to click Options and there's a choice to erase the drive and reinstall.
Keep going through, insert CD 2 when needed. Once OS X is installed and running, insert Software Restore 1 and follow the instructions - the Restore CDs install stuff like AppleWorks and Classic.