this should be what your looking for hope it helps http://www.macgurulounge.com/easily-prep-mac-resale/
I'd try booting into safe mode. Once in safe mode shut down and restart normally and see if that helps.
Here is a link about safe mode that may help http://support.apple.com/kb/HT1455.
also have have you tried holding down the x key during startup? If the iBook has a valid OS X startup volume, this should force it to boot to it.
I'm thinking this is a hardware problem.
Have tried everything mentioned. Still blue screen freeze. Not even a cursor.
Going to be hard to sell without specifics on the machine since I can't get to "about this mac", etc.