I want to BACKUP my files to an external hardrive and reinstall OSX

Can you boot from the installation disks? If you can, do you see an external hard drive when you connect one? do you see the internal hard drive?

if not, then:

Do you have access to another Mac at all? Even a friends Mac?

You might try connecting your iBook to another Mac via firewire in target disk mode. (turn off iBook, connect it to the other Mac with a firewire cable while the other Mac is on, turn on the iBook while holding down the "T" key).

Your iBook's hard drive *should* show up as an external drive on the other Mac's desktop. Then you should be able to get your files off of it and reformat/reinstall the OS.