djcbboy,
I have a Canon LiDE 30 scanner and have a similar problem. If the scanner is plugged into my iBook, it will sleep when the inactivity reaches the prescribed time. However, if the scanner is not plugged in, it won't sleep unless I physically close the lid.
The problem is that there are 2 processes that are loaded up on every restart that prevent the Mac from sleeping. If you run Process Viewer, you'll see the two processes. They are N067U_Button Manager and N124U_ Button Manager. I force quit them both and my iBook will sleep fine.
Of course, the next time I restart, they will start-up again. I tried turning them off from the Login Items, but they still show up. So I just do the force quit and leave it at that.
BTW, I'm on 10.2.8, but this has been happening since 10.2.