You put on quite a tone additionally to being short on info.
I have an iBook too, with a sometimes bad hard drive and I can quite happily boot form an external Firewire hard drive by pressing and holding the Option/Alt key right after the start-up sound can be heard.
What does happen exactly after you press that key? What is shown to you?
And what do you mean booting from an Install Disk? Is it the Disk that came with the iBook or the drive you wrote about?