Ok, I have an iBook G3.

I was restoring it to factory with the Software Restore disks which came with the unit as I was planning to move on to a new unit.. But there was a power cut in the middle of the process and the unit shut off. Now, it does not recognise a HD when booting holding option.

It also will not boot from any CD/DVD other than the Apple HW Test disk provided with the unit.. All other disks spin up and then get ejected, on the odd occasion it does not eject, it boots to a icon of a floppy diskette with a flashing ? (Saying that, I did manage to get it to load from the restore disk 1 once, but it just saidit could not mount the image file)

The HW test disk returns no problems
I have reset PRAM multiple times, and reset nvram and all in Open Firmware. I have also reset PMU as a last resort, but no luck :(

Any ideas?

Can you open the the iBook in Firewire mode (hold down the T key while booting)? If you can then you could run disk repairs on that drive or even copy a system folder over. It sounds like you may have damaged the firmware on your Mac and you may need to run that installer again.