Coming in on this late, and I apologize if it's already been solved.
I haven't seen any indication that the machine is starting and loading firmware correctly. Do you hear a 'chord' as the startup chime? (In particular, NOT a series of beeps or 'bird chirps', which among other things is the way the Mac tells you it has a bad memory chip).
There 'should' be a functional internal speaker if you unplug any external speakers -- but just in case, you might want to have a known-good set of speakers to plug into the back.
I have never had difficulty using a USB keyboard to get my G4 towers to boot from CD by holding the "C" key (but nothing else!) down immediately after you hear the chime. This does presume:
1) that your CD drive is connected and workable; and
2) that the CD is actually inserted in the drive when the system goes through power-up.
Things can get just a bit complex if the machine doesn't have an external CD eject button, your keyboard doesn't have the 'dedicated' Apple 'eject' key on it at upper right (looks like a little triangle) and the Mac doesn't automatically kick the drive open for you to load the 'expected' CD if it isn't in the drive and you're pressing C down. My 'recommendation' is to access the front of the physical CD drive (removing bezels if necessary) and use a straightened paper clip in the hole to pop the tray open.
Be aware that you can often NOT use 'restore' or 'install' disks made for one flavor of G4 in different machines. (I do not recall, however, having one of these just sit there and fail to give me a message like "you cannot use this disk with this computer"). What you might have to do in this case is find or purchase a retail copy of the Mac OS (eBay is one source) ... but another issue rears its head here. Nobody here seems to have thought to mention that the install disk for 10.4 is a DVD, not a CD, and it will not work if what you have is a CD drive (as a great many G4s do). In my not-so-humble opinion, the correct 'fix' for this is to obtain either a 'combo' drive (CD-RW+DVD-ROM) drive or, better, one of the later versions of internal IDE DVD-RW drive, and put this in place of the CD drive. (There are some complications regarding sharp-edged and taped internal shields in some machines -- use common sense and care when doing the job!) You don't need any complicated IDE jumper setting matching on a Mac (although someone else here might jog my memory on whether it's better to have a jumper on 'master' or no jumper at all for your given model of DVD-RW drive...)
Note that if you can find somebody else with a Mac that has an open hard-drive bay and cabling, you might have THEM run Disk Utility to format your hard drive and install your copy of OS X on it for you. [Note I did NOT say 'have them clone their OS install on your drive'!]. When you install this disk back into your computer, it should have no trouble finding and starting from that disk directly (as it's already trying to do that... you are correct that the 'flashing icon' means that the Mac has found the IDE interface, but can't locate a valid System folder on the hardware).
The "other" trick that I've used is that you can make the Mac into a big, fancy external FireWire drive by holding down the "T" key when you start up. If you have another Mac, with working DVD drive, and connect this to yours with a FireWire cable, the 'other' Mac will recognize your computer's drive and should be able to run the OS X install on that drive. (I did this in extremis with a couple of G3 laptops and iMacs...)
I've had mixed results with using an external DVD drive on a FireWire connection to be a startup drive for initial install. Theoretically, the firmware 'should' see such a drive before it gives up looking for system folders. This might be worth a try if you can't get access to another Mac... but be certain whatever external drive you use is known to work with Macs. (Many use Windows-specific code to keep their cost minimized, so beware...)
If you're still involved with this, let me know how things are working out.