my very rough guess is all you problems are caused by your old firmware , Apple had a reason to create that update , and it does not make your iMac G3 less original
from Apple support page
If you own an iMac (Slot Loading) computer, you
must install the iMac Firmware Update 4.1.9 before installing Mac OS X 10.2 or later.
http://support.apple.com/kb/HT3036?viewlocale=en_US
and installing the firmware update is really not rocket science
here the how to
http://support.apple.com/kb/HT2561?viewlocale=en_US
so please if you want to enjoy your iMac boot into OS9 (9.2.2 is the latest verision and its great too with clasilla webbrowsing works) and install that firmwareupdate and then ugrade your ram to 512mb at least ,because OSX wants nothing more then ram and more ram 10.2.8 is using already around 200mb ram , without any app loading ,after all that is done then install jaguar 10.2 again ,
but you would even get a faster and better experience with Panther 10.3 (works with 384mb ram but thats pushing it already )and with tiger 10.4 (512mb are fine but better 768mb -1gb )
and you still can boot into OS9 if thats your concern
please your iMac is suffering , he does its best , but you need to support him a bit
