AtP,
It would seem to me that even though you have gray disks, they are booting and installing, at least up to a point. There are gray, machine-specific disks that will work in other computers and I believe you have a set.
I will point out that the symptoms you describe are common to a lot of Lombards, and they are these:
-Lombard runs perfectly when booted to OS9 with the RAM maxed to 512MB or less.
-The same Lombard, when trying to install any version of OSX, will either not boot the OSX disk or freeze during the install or freeze when restarting after a successful install or freeze randomly if OSX was successfully installed.
-The problem lies with a certain run of microprocessor cards and the workaround is this: Leave the top memory slot empty and run the maximum 256MB of RAM in the bottom slot.
Since you are successfully running OS9, download 'PPC Checker' here:
http://www.xlr8yourmac.com/G3CARDS/PPCchecker/
...and see if it reports this number:
PowerPC 750L (LoneStar, Rev2.2) Copper G3 PVR = 0x00088202
If so, you unfortunately have the troublesome CPU, but as I said earlier, you can still run OSX.
Let us know what you find.