I have a IMAC G3 with mac os 9 giving this same error "the system software on the startup disk only functions on the original media, not if copied to another drive"
i have lost system install&restore cd i was wondering if i could use anything below or above a mac os 9 install&restore cd.
i tried mac os x but the computer just rejects the cd any input will be great thanks

It depends on which iMac you have. You can't install an OS
that is later than the model. That is, if the iMac shipped
with OS 9, you can't go older than that. If it shipped with
8.5, then that is the oldest system it will run. As far as
going in a newer direction in the OS, you should be able
to go up to 10.3 at least, 10.4 with a little tweaking on
your part depending on which iMac you have. Make sure
you update the firmware first before going to OS X. You
can check to see if your machine needs a firmware update
here....

http://docs.info.apple.com/article....

You need to run the firmware updater from OS 9 prior to
installing OS X.

And, on an older machine, I'd recommend an minimum of
256 MB of RAM for running OS 10.1, 10.2, and 10.3. And
512 MB for running 10.4.