Hi, iBookProdigy -
Tried to copy from a CD, was not usable.
If you were copying the System Folder from an OS 9 Install CD, that will not be usable - one or more of the files in that kind of System Folder have been altered, and that System Folder will work only when it is on the CD.
If it was one copied from another machine, it will not be able to be used for booting while on the CD. If the machine it was copied from is a different model Mac, after copying it to your hard drive it will not be usable usable for booting your iBook, but should be usable for Classic.
In order to rebless an OS 9 System Folder, open it, drag the files Finder and System out onto the desktop. Close the System Folder. Drop those two files back into the closed System Folder.