You'll need a bootable 10.3 install disk. Open Disk Utiltiy when booted from that disk and Choose "Erase." There are also options to write zeros so that you can really clear the HD. After that, run the OS X installer from that same disk. Once 10.3 is installed, either use Software Update (under the Apple menu) or go to Apple's web site and download the Combo Updater for 10.3.9 and install that. After that, providing that the iMac has successfully booted from the internal HD at any stage in this process, reinstall your other software applications.

I have the boot discs but I cannot get into the operating system to get to disk utility. How and where do I erase the disc?

Boot from the installer disc, after the first screen to select the language, go the Menu bar at the top of the screen, under one of the drop downs is Disk Utilities. Can't remember if back in 10.3 you had to go a screen or so past the language select.

You might want to go to the Partition option in Disk Utility instead of Erase, choose 1 Partition, Mac OSX journaled. I don't know if XPF modifies the boot blocks or not, so to be safe use Partition.

I think the problem is the CD ROM drive itself. It doesn't seem to run for some reason and it's not allowing the disc to boot.

That's a good possibility.

You held the C key down at start up to make it boot from the CD? Or hold the option key down till you see the blue screen and choose the CD as the startup disc.

You can get a slot loading CD player on ebay for less than $20 shipped, but if you want to experiment more I'd maybe recommend getting a different iMac. 400 Mhz or higher will have firewire ports, 500 Mhz or higher will have a better video chip that will help with OS X.

If you live in or near a major city there may be a computer recycler or used computer store that has iMacs for the same price as on ebay, or search ebay or graig's list for a local seller. I got a couple over a year ago for $65 each locally.

I actually got to the install screen and the OS tries to install however and I chose the selection to erase the disc. However, the install gets hung up when installing the system software. it got stuck on this screen for a while and I finally had to turn it off. When I attempted the install, the CD Rom sounded like it was chocking and stalling. When I turn on the screen now, I get a circle with a cross thru it.

That means there is no OS to boot from on the hard drive. I'm beginning to wonder if the hard drive is failing. Suggest you boot from the CD again, select Disk Utility from the FILE menu and perform the erase from there and then try to install the OS.

Use Disk Utility to make a new partition like i described above before installing again.

Also, choose Mac OS Extended (Journaled).