i have two clams...
-300 GHz 288mb (32 stock,256 pc 100) ram 40 gig hd (upgraded)
-366 GHz 192mb (64 stock,128 pc 100) ram 6 gig hd
i have done pretty much everything under the sun with these..so here it goes
-tiger from mac os 9.2.2 using XPostFacto4...yes you can then use tenfourfox browser (which will not give you script errors..see below),but trust me don't waste your time...grass grows faster!
-panther installed running camino web browser 1.6.11....it runs ok...but unlike what adcx64 says it runs ok at best as long as you stay away from graphic rich web sites (even yahoo home page will cause script error that is a pain waiting for)...it you stick to simple pages like macrumor forums,craigslist ect ect sites it's fine.
-tryed osx 10.1...it's faster running then panther,but because of lack of modern browser,itunes ect it's pretty much a non starter
-i have run and installed unbuntu 6.10...it ran ok but i had issues with slow graphics and never could get wifi working
-so now what i believe is truly your best bet for using with a clamshell...mac os 9.2.2,then install classilla web browser,...then pages even like yahoo home page will load without errors and a good deal faster then in osx panther.
ps: i run a dual partitioned 40 gig drive with mac os 9.2.2 and osx panther (which in classic mode i run classilla)
ps: here is how to take apart a clam to upgrade harddrive...if you try...take your time and place screws ect in numbered bags ect so as not to get confused when putting back togeather....it does look a tad tricky...but really not as bad as it may seem if you take your time
http://www.ifixit.com/Guide/Repair/iBook-G3-Clamshell-Hard-Drive/115/1