booting from iPod loaded with OS X.3 install

In my quest to fix/backup my G4 iMac, I've loaded an install of OS X.3 onto my iPod. However, I can't seem to boot from the iPod correctly. What I am doing is using the Hardware test/system restore DVD to boot into the start-up disk selector. I enabled the iPod in disk mode so it could boot from it. When I select the iPod as the boot disk, it displays a circle with a cross through it similar to the icon on the iPod when it says "do not disconnect". I've verified that there is indeed a full copy of OS X on the iPod by connecting the iPod to my PC and viewing the files. What is the problem here?

Jalexster said:

I'm preety sure that holding down option while your Mac is starting, will allow you to choose the drive it boots from.

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i'm able to choose the drive to boot from, the problem is that when it tries to boot, it displays the circle with a cross through it on a gray background.