Hi Rob,
I had the same problem with my iMac G3 that the kids use, only there were 2 CDs in the slot, and while I was trying to find a paper clip to try the manual eject button, my 4-yr-old apparently put a 3rd CD in the slot!
I tried everything, including restarting with the mouse button held down (didn't work) and there was no CD icon on the desktop to drag to the trash. The paper clip in the manual eject button did cause the 3rd CD to eject partially, only about 1/8", so I took my needle-nose pliers (yes, but I was desperate and nothing else was working) and as gently as possible pulled out the CD. This left me with "only" 2 CDs in the slot. I found that the article mentioned above
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http://docs.info.apple.com/article.html?artnum=58566 iMac (Slot Loading): Troubleshooting CD/DVD Eject Failures
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worked for me. After trying this several times, eventually the 2nd CD ejected 1/8" so I used my handy-dandy pliers again. With only one CD in the slot (but still no icon on the desktop), the paper clip in the manual eject button worked perfectly. I tested the slot-drive by inserting a different CD and the drive was reading as it should. I have not yet retried one of the CDs that were stuck in the drive. I'm hoping I didn't damage them since I only touched the outer silver edge (that's all that was barely sticking out of the drive) and not the printed area.
Hope this helps!
Laurie