Good news. I fixed it.
After sending the PowerBook into Apple I was told that the drive was stuffed and needed replacing; expensive and time consuming since there are currently no Combo drives in stock.
This seemed unnecessary to me. The problem appeared to be a simple mechanical failure and I couldn't help but think that they probably didn't even try to fix the original drive. So I had a go myself, and managed to fix the drive without any problems.
This is what I did (follow these instructions at your own risk!):
1 - Removed the Combo drive. (see
http://www.macresq.com/store/detail.php?prodID=P009644 for instructions).
2 - Undid a bunch of obvious screws to pull the drive apart, being careful to remember what goes where. This was pretty straight forward, except that I didn't have the correct (Torx) screwdriver, so I had to use a regular flat-blade screwdriver instead.
3 - Near the back of the drive, away from the pastic pulley that was preventing the disk from being inserted, was a relatively large sheet of metal that is obviously supposed to slide freely against another, except in my case it was stuck. I applied a small amount of WD-40 lubriant, being careful not to get it anywhere unwanted, and this fixed the problem.
4 - Reassembled everything and booted to test.
The first time I tried to boot I got a fatal "system error" (something about a corrupt stack) just before the login window displayed. This caused some panic on my behalf, but I rebooted again and everything has been fine since. And now the drive works as good as new.
Now I just have to tell Apple that I don't need that Combo drive after all.
