So, are you saying that your Powermac G5 will not boot with or without the cover on? From your topic title, "[Powermac G5] won't start with cover off" it seems that you are saying that it will not boot with the cover off. But, in your original post, you say "When I remove the cover and the internal clear plastic cover - it starts up" making it seem like it will not boot when the cover is in. Which is it?
Now, if it does not boot with the cover out, that makes sense to me. With the heat this thing makes, it wants to make sure the air is going in and directly out of this thing to cool it.
And yes, there is a switch there that the Powermac G5 can test to see if the plastic cover is in or not. If you notice, one of the tabs on the bottom of the plastic cover has metal in it. I assume that that the computer does some electrical test and can tell the difference thanks to that piece of metal.