Is this iMac G3 the type with tray-loading optical drive (233-333 Mhz) or does it have a slot-loading optical drive? I guess if it has FireWire, it must be a slot-loader, but I thought I'd confirm.
I was wiping the hard drive through firewire with my PowerBook G4
Does that mean you were using FireWire Target Disk Mode to start up the iMac G3, connected to the PowerBook G4 through FireWire? If so, did you try powering off the iMac G3 (pressing and holding its power button), and then starting it up in FireWire Target Disk Mode again.
It's possible the hard drive from the old windows machine is becoming faulty, which caused the problem. Also, if it is larger than 128GB, it may not work reliably in an iMac G3.