There is a likelihood the grey install-restore disc set may not
be for iMac G3 500GHz model you have. However the reason
why the disc media rejects insertion of a disc before trying to
read is also a possible issue; this may be of most importance
As there is information on the grey system media, that pertains
to the intended model and build year specifically; could you read
that and enter it into your posted thread?
Your model identifies with in specs as iMac (Summer 2001) and
there is more information from MacTracker.ca information app:
Introduced July 2001
•Discontinued January 2002 (700 MHz), March 2003 (500, 600 MHz)
Model Identifier PowerMac4,1
Model Number M5521
EMC 1857
Order Number M8582LL/A (500MHz Indigo), M8490LL/A (500 MHz Snow), M8492LL/A (600 MHz Graphite), M8546LL/A (600 MHz Snow), M8510LL/A (700 MHz Graphite), M8554LL/A (700 MHz Snow)
Software for this group of which yours is a member generally is identified:
Original OS Mac OS 9.1 (Mac OS ROM 7.5.1) and Mac OS X 10.0.4 (4P13)
Later OS Mac OS 9.2 and Mac OS X 10.1, 10.1.2, 10.1.3, or 10.2
Maximum OS Mac OS X 10.4.11
Hardware Test AHT (iMac/eMac) 1.2.1, 1.2.2
(firmware update would have been version 4.1.9)
So the grey disc installation set, if you can get the optical drive to read contents
should have imprinted on the label certain information pertaining to above. An
information database online I tried to check by serial number, didn't yield details.
The built-in slot-load optical drive may have dust; it may be that use of a can of
compressed air could work to attempt to dislodge any. But there usually is a
cover or protective section that moves out of way to help keep dust out. By now
IF dust is a problem inside the disc drive or if that drive is otherwise defective,
further investigation may be required.
The correct system install-restore disc may be used to start the computer, and
bypass the system in the hard drive, then erase present system; and re-install.
So hopefully the grey-label disc media is for your exact vintage model series
iMac G3 and not some other; because a different set won't generally work.
And if the optical drive is bad, you would need to determine that before any
attempt to do more than clear debris from the slot. More information on opening
these should be available in the iFixit.com Mac repair guides; for iMac G3 model.
And a repair guide should show the process to open this later model iMac G3.
Hopefully the unit can be cleared and new system from original media installed.
Good luck & happy trails! 🙂