For some reason that has yet to be explained, incorrect software installation disks were included with some 15" 1ghz iMac G4s (is this the machine you have?). My mother had this issue with her machine, and I did as well when I bought mine used. I've talked with a Genius about this issue and he told me that he saw this issue before, but couldn't explain how it happened.
It's possible to install OS X, but the additional applications cannot be installed. Instead, the error message you describe is what you get. You can install the additional applications directly from the hidden .dmg files, but you must make certain that the included support files for some of the applications are installed in their proper locations in the Library folder. It's not difficult to do this as the support files are already nested into folders within the .dmg files that will match the nested folders in your Library folder. Simply take note of their locations in the .dmg files and drag them into their respective locations in the Library folder.
You can open the hidden .dmg files by searching on your install disk for hidden files containing ".dmg" in the name.