I'd be worried about the lifespan of the powerbook. It wasn't designed to be running with the monitor closed. They are wired so that the monitor cannot be on when the laptop is closed.
Has anybody had problems with this, or heard of anyone?
You can use your PowerBook G4 (12-inch) and PowerBook G4 (12-inch DVI) computer with the display closed when the computer is connected to an external monitor, keyboard, and mouse and the power adapter is plugged into the computer and an outlet.