First, you have to be using a FW external drive and not USB. Second, you have to properly prepare the external hard drive. Third, AcomData's FW cases frequently have problems functioning as bootable devices.
Here's what you need to do to prep the drive in advance of installing OS X:
1. Boot from your OS X Installer Disk. After the installer loads select Disk Utility from the Installer menu (Utilities menu if using Tiger.) Be sure to use the installer disk for the version of OS X you intend to install.
2. After DU loads select your hard drive (this is the entry with the mfgr.'s ID and size) from the leftside list. Click on the Partition tab in the DU main window.
3. Set the number of partitions from the dropdown menu (use 1 partition unless you wish to make more.) Set the format type to Mac OS Extended (Journaled, if supported.) Click on the Partition button and wait until the volume(s) mount on the Desktop.
4. Select the volume you just created (this is the sub-entry under the drive entry) from the leftside list. Click on the Erase tab in the DU main window.
5. Set the format type to Mac OS Extended (Journaled, if supported.) Click on the Options button, check the button for Zero Data and click on OK to return to the Erase window.
6. Click on the Erase button. The format process will take 30 minutes to an hour depending upon the drive size.
Since Panther is your ultimate goal you should purchase a standard retail Panther installer diskset. There are four CDs, three for Panther and a fourth for XCode Tools. The disks have a black label with a large gray "X". The cost may range from $60-$120 depending upon source.
After prepping your drive you can then proceed to install Panther directly. Then download the combo updater needed to update to the desired version.
Given the age of this computer, I would strongly recommend you replace the internal backup battery (located on the motherboard.) if it has never been replaced.