I just had an issue like this. I was able to boot up with an external firewire drive, although it was a lot of trouble. I think doing an option boot finally worked; holding down the option key, I eventually got to see the firewire drive was bootable, and booted from it.
I put the thing in verbose boot mode (command - v , I think; but please look it up. I have no Mac books at work to check). In verbose mode, you could see that the hard drive could not mount; the OS tried to do fsck, but it failed around 2/3 of the way, and the CPU was halted.
I was occasionally able to boot normally, but never in safe or single user modes; these do a disk test first, which invariably failed.
I could see from the system and console logs when I managed to get the firewire boot going that there were repeated errors trying to access drive s03, the internal SATA drive. The logs on the SATA drive showed huges numbers of errors. At a wild guess, for some reason a lot of sectors went bad all at once. There had been a some erratic behavior before, but I'd put that down to the single processor G5 problems. (these were non video related, just freezes).
Applecare wanted me to carry the huge thing into the local Apple store, but I persuaded them to just send me a replacment hard drive, which they did. The new one works perfectly.
PowerMac G5 1.8 SP (late 2004), 1.42 mhz 14 iBook Mac OS X (10.4.3) both with 1.5 GB Ram