A Series of Unfortunate Events - Any Ideas and help appreciated!

Question

Four weeks ago, when performing some routine backups, I started to get error messages. Upon further research, I discovered my internal HD (Macintosh HD), was reporting an imminint failure. I started to use my external backup as my main HD until I could replace the internal. LIfe happened for a couple of weeks before I obtained a replacement HD, on a Thursday. Friday I would replace the internal HD and restore from the backup. Unfortunately, my backup HD refused to mount Friday, scuttling that plan.
First, I needed to diagnose the external HD. Both a local dealer and the manufacturer reported, after I described the problem and a diagnosis, that it was likely the power supply that was at fault. The company would send me a replacement at no cost. The problem is, the power supply was out of stock and I would have to wait a few weeks.
So I revert back to the internal HD, the one that has been reporting a imminent failure for a few weeks. Not wanting to work on a HD that might fail at any time, I made additional copies to CD/DVD of anything important, and installed the new HD. However, when I inserted the OS X install DVD disks, it would kick them out after about a minute. The internal SuperDrive has been rather sporadic for the last few years. Sometimes it works, usually it doesn't. So I do most things using CD's or DVD's on an external Firewire DVD drive. However, my understanding is that I can use the install DVD's only in the internal SuperDrive. They will not work in an external DVD drive.
So in one last attempt to get things working, I decided to use my iPod as an external drive. Since I obviously couldn't copy 65G of data onto a 20G iPod, (2nd generation), I needed to copy only crucial information. Obviously a boot disk does not need my photos or music, or most applications, so they were not included. Anything related to printers I don't own were also canned. Anything I wasn't sure about I kept. I finally got a bootable image onto the iPod, or so I thought.
I go into startup disk in system preferences, choose the iPod, and restart. I tried it a couple of times. Each time I would get the infamous "kernel panic". No doubt something important was missing.
So my questions:
1. Is it possible to install the OS from disks using an external FW disk drive? Or must I use the internal SuperDrive?
2. Is it possible to use the OS X install disks to make a bootable copy on an iPod? How is this done?
3. Is there a definitive guide, when using a program like Carbon Copy Cloner (or another) on exactly what needs to be copied to create a working boot copy? Or is this trial and error? Is it even possible to create a boot disk on a 2nd generation iPod?
Any ideas or help is most welcome!!!

Answer 1

To diagnose your issues and suggest solutions, it is essential to know what model of Mini your have: G4 (2 usb ports); older Intel (4 usb ports); 2009 Intel (5 usb ports). Regarding the install discs: they must be from the same model as your Mini.
I agree with tm311 ... life is telling you to get a newer Mac. These apple refurbs, which come with current OSX, ilife, and warranty are good values:
http://store.apple.com/us/product/FB138LL/A
http://store.apple.com/us/product/FB463LL/A
http://store.apple.com/us/product/FB139LL/A
http://store.apple.com/us/product/FB464LL/A
You'll have to check these links daily to find them in stock.