This is the first time I have heard about such a thing.. Before I was able to boot off USB on my PowerPC's, both G5 Quad and PB G4 DLSD 17 inch I was able to clone over using CCC Leopard and it would boot off externals all day long.. Perhaps you might have a drive thats not working right?
Since PowerPC is known to boot off firewire you shouldn't be having this issue.. Do you have a Leopard install disc? If not.. I can help you further as I have done these things before..
Send me a private message with a more vivid description of your issue and I can do my best to help you with what you want to do.
PPCMM
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Its funny you say this since last month I used my USB Flash drive to boot up Leopard and I was able to re-install it with no problems.. I alsp tested it on my Mercury on the GO external FW/USB drive and it too had no problems booting and installing OS X.. Perhaps this drive the OP has is not an oxford chipset based external device?
Not all drives are created equally.