My iMac G5 has flashing question mark folder, no hard drive, no DVD-drive, no target drive - help?

A friend has 'kindly' decided to upgrade my father in law's iMac G5 and apparently found that it ceased to work following an aborted process. I have no idea what he's done but there was a Leopard DVD in the optical drive. The iMac boots to the smiley face folder but scrolls through 2 black screens and one grey screen first. A question mark appears at first then it changes to the smiley face folder with the question mark appearing occasionally.

I cannot get the iMac to see either a hard drive or the DVD drive. No start up disc at all. I have tried starting up in target mode and the target mode sign doesn't appear on the screen nor does the hard drive show on the other mac.

Starting up holding down either 'C', 'X' or 'R' doesn't produce any results. Starting up with 'alt' pressed down produces a screen with a padlock image followed by a white slot to write a password in and a greyish button with an arrow. None of the passwords associated with the machine have got us past this screen.

I can also get a command line on screen by holding down the startup button, hearing a loud beeeeep (firmware update signal?) keep holding down and a white screen with very small text invites me either to write 'mac-boot' or 'shut-down'. Both commands require a password to be effective and so do not work.

Following startup troubleshooting advice has allowed me to identify that there is both a start up button inside and an SMU reset button. Three of the four led's come on fine and there are no problems with the starter button on the back panel.

I'm loath to change the hard drive at this point as I'm not sure if the HD is duff or something is wrong with the hardware and that another HD would be damaged.

Stumped.