IMac G3 MacOS X 10.3 installation problem:(

That model iMac requires a firmware update BEFORE attempting the install of OSX. It may be in a real mess right now if you did not do the update.

iMac Firmware Update 4.1.9: Information and Download

Most G3 Macs are not able to boot from USB, and those which can I believe must be issued a special command from a special startup mode which sort of has a command line. I forget what this mode is called and how to get into it. I have no idea if your G3 can boot from USB. Plus todays USB sticks may not necessarily be compatible with such an old computer.

Assuming the .iso image is good, then you should try burning it to a CD. I'm not entirely sure how to do this with a Mac since when I did this 20 years ago I used a third party app to do it. It isn't about burning the .iso file to a CD like a regular file, but you must burn the raw image contained within the .iso file to a CD.

Try using another USB stick especially an older one. Like I said, newer USB sticks may not be compatible with such an old computer. Plus Macs can be very picky about the USB drives used for booting.

Have you ever used this .iso image to boot this Mac before?

How did you burn the .iso image to the USB stick? If you plug the USB stick into another computer do you see the .iso file on it or a bunch of partitions and/or files?