Imac, snow, summer 2001, need help to restore

Hello,
I just bought a used Mac from a neighbor and in the process picked up this little Imac for free that didn't work and was headed for the trash. I have done minor repairs on our family pc's, so I was just hoping I could "fix & save" it, then pass it along to Grandma, as I have done with all of my old computers. Now that I have had a few weeks with my Pro, and I LOVE it, I want more than anything to repair the old Imac as many of you have done already.
It is an Imac, summer 2001, g3, 256, 600mhz that is giving me the blinking folder at start. I have read all the threads, and I gather it is not finding the OS to load. The firmware version says, PowerMac 4,1 4.1.7f4, which I know is not the highest to date. I have replaced the internal battery which was almost dead, checked connections on the hard drive and ram, and tried all the resets. Everything lights up and appears to be working, but it stops at the blinking folder and mac face. I even tried to start it upside down! Ho
I was able to download the Apple Hardware Test for the g3 and burn a cd. When I boot to this cd and run the quick and extended test, it says passed for all. The only cd's that were given to me with the computer are for OS X, Panther version 10.3 which was bought for it at a later date. But when I try to reinstall the OS X, 10.3, I am stopped when it asks you to select destination and there is nothing in the "select destination" to choose. So does that mean it just can not recognize the hard drive or is the hard drive not working. The only other symptom that might help is the sound when I turn it on. I hear the chime, then the sound of something dropping in a hole or slot, and bouncing. I actually hear it twice before the blinking folder shows.
Is there anything else I can do to be sure I need a new hard drive? I don't have the original set of install cd's for OS 9 and 10 that apparently were packaged with it new. If I buy a new hard drive, will I be able to install the Panther with the firmware version above? Is is possible for the hard drive to go bad if the computer wasn't used much in it's early years, and none for the last four or five years?
I would be most appreciative for any help you can give me. My tech skills are only mediocre, but my patience and persistence are extremely high!

Curllie,
The firmware version says, PowerMac 4,1 4.1.7f4,
It should say 4.1.9
But when I try to reinstall the OS X, 10.3, I am stopped when it asks you to select destination and there is nothing in the "select destination" to choose.
It probably has the right firmware because if it was 3.0? or whatever? before 4.1.9 booting into anything 10.2 and after would have killed the video in this iMac.
Everything lights up and appears to be working, but it stops at the blinking folder and mac face.
No that's great because the way these iMacs fail is the display doesn't light.
I even tried to start it upside down! Ho
We call that the inversion technique. It works for iMacs that have solder problems; flybacks, capacitors. I have one that's very green right side up but perfect upside down.
So does that mean it just can not recognize the hard drive or is the hard drive not working.
Right, both. It's not seeing the hard drive or the drive is not working. You could possibily use disk utility to mount and erase the drive.
I hear the chime, then the sound of something dropping in a hole or slot, and bouncing. I actually hear it twice before the blinking folder shows
Wow never heard that but it might be the bad drive.
Richard

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