Hi,
I had a similar situation, my wife placed a small CD into the drive and it got stuck, nothing I did could get it out.
In the end I found some instructions online to split the laptop open and managed to extract the CD from the CD-ROM drive quite easily once you have access to the physical drive without the iBook case in the way. After re-building everything worked fine, in fact I'm typing this on the said laptop.
There are lots of guides on the web for doing this, generally looking for a guide to replacing the HDD is what you need, i.e.
http://www.faqintosh.com/risorse/en/guides/hw/ibook/g4hd , and then go the step further to remove the CD-ROM.
HTH and good luck.