panic(cpu 0 caller 0xFFFF0003)

If you can't startup from you DVD drive, then either your optical is malfunctioning (hardware failures can cause kernel panic) or there may be a bus problem or a myriad other hardware related issues.

If you still have apples care active, then call a Apple Customer Care immediately and have them verify the problem. They will then give you an authorization number to have a tech from an authorized service center pay you a home visit. They will confirm the problem and take your mac in to be serviced. When ready, they will bring it back to you and set it up.

If you don't have Apple Care, you will have to take it in to an Authorized Service Center.

Have you tried booting up from a Firewire drive. You said you can access you Mac in target mode. This tells me that the firewire ports and busses are OK. You may be able to boot from a Firewire drive as a result.

Have you tried holding the Option key down on boot up. The Mac will boot up, but will only goes as far as loading the firmware. After which, you will get a screen displaying all the drives on you system that are bootable. Here is where you select the FireWire drive.

BTW - The Firewire Drive can be an HDD, Optical or Target mode drive connect to the problem mac.

Give it a try and get back with what happens.

Good Luck
Gary

Sounds like an internal bus problem. If you can, borrow a DVD from someone and replace the installed one. Re your manual for procedures. Try booting off of that. If it works, then your existing drive is fried (also covered under Apple Care).

If you replace the DVD drive and you still have a problem, then the problem is most like on the mother board. The DVD and HDD do not share the same bus. Your DVD is IDE and the HDD is SATA.

I'm afraid the only coarse of action left is to take it in for repairs.

Gary