Imac G3 trayloading Grape Cd won't recognize disks.

Yeah, Mac OS 9 is not very good at using PC-formatted stuff, and its files often have something called a "data fork" (If I recall my terms correctly). Putting Mac OS 9 files on PC-formatted storage messes up the file. So if the other computer is a Mac running Mac OS X, use Disk Utility to format (erase) the flash drive as Mac OS Extended (Journaled). That's the same as HFS+ in Mac OS 9, so there will be no problem with the file transfer.

If have the space, you should maybe transfer the entire extracted Mac OS 9.2.2 System Folder (or keep it on the flash drive) in case you need some other System Folder file.

Also, I did not ask earlier, but what version of Mac OS 9 is currently on the iMac?

Maybe when you installed that "software for cd," it disabled the Apple CD/DVD Driver.

Run Extensions Manager from the Apple Menu -> Control Panels. In the list of Extensions, look for something called Apple CD/DVD Driver. If it's there, it is probably not checked (disabled). Check it, and restart. Hopefully, your old iMac's optical drive will start working again.

If that extension (driver) is not listed, you'll need to find a copy of that file and put it in

/System Folder/Extensions/

You can get it from an existing Mac OS 9 System Folder. Maybe you have an older backup of the current installation? It's part of a Mac OS 9 installation, so I don't know of a separate download.

If you have a Mac that currently runs some version of Mac OS X (including that tray-loader G3 if it also has Mac OS X installed), you can get a complete Mac OS 9.2.2 System Folder using this method which I summarized here

https://groups.google.com/forum/?fromgroups#!topic/macos9/nR2QQCKaCFA

There's also an old Mac program called TomeViewer. You can use it to extract individual components from Mac installation packages (which were called "tomes" in the old days).

http://home.arcor.de/grouchosbox/tomeviewer.html

If you have your Mac OS 9 installation disc, you can use it as the source. You may also be able to use a Mac OS 9 updater download, such as the one for Mac OS 9.2.1 and extract it from there (assuming it includes the Apple CD/DVD Driver - probably does).

I'm not exactly sure what "first process" refers to, but if you have an old backup of your Mac OS 9 System Folder now, or you extracted the Mac OS 9.2.2 System Folder, proceed as follows...

Open that System Folder and go into Extensions. Find the file called Apple CD/DVD Driver. Make a copy of this file and put it into your primary Mac OS 9 System Folder, into the folder called Extensions. Restart your computer from your primary Mac OS 9 System Folder, now that it has the driver.

when i try to put it on the iMac it shows it as a PC file

Where is the file before you try to "put it on the iMac"? If you are moving it from another computer, what is the other computer and what method are you using to do the file transfer?

(I might be able to provide more detailed steps, with some more detailed info from your side...)

If you are using something like a USB flash drive, and the iMac only runs Mac OS 9, your problem may be that the flash drive is formatted for Windows. You'll need to format (erase) it on a Mac and use HFS+ as the format type. HFS+ is called Mac OS Extended (Journaled) in Mac OS X Disk Utility. NOTE: If you do this, a Windows PC will not be able to use the USB flash drive anymore, until it is reformatted for Windows again.

I asked because, if you had said it was something like 9.0.4 or 9.1, I would have suggested you use the ENTIRE extracted Mac OS 9.2.2 System Folder to boot the iMac, instead of just copying one file from it. 🙂

But if it's already 9.2.2 (or 9.2.1) and it doesn't have any other missing parts, you're fine...