Making a used iBook my own...

I was raised a PC person, but I started a new job where they all use Apples. I purchased a used Blueberry colored iBook clamshell for my own personal work station, and I'm trying to upgrade it to better suit my needs. Here's what I know/need:
I bought it running OS 9.0.4 but I also purchased copies of OS 9.1 and OS 10.1.4. I was told that I had to get it up to 9.1 before upgrading to 10.1.4... is that true?
The hard drive was still loaded with the previous owners files, and many of them were password protected. How can I format the hard drive?
It currently has a 300MHz G3 processor, with 128MB of RAM. How high can I upgrade the RAM? On Crucial.com it said I could only go up to 288, but I've seen posts on here saying that I can go as high as 588. What the truth?
Also... what is FIRMWARE?? I've seen it a lot on these discussions also. "Make sure you update FIRMWARE!!" What does it do? How high should I update it? Did I ruin my chances by already installing OS 9.1??
I really do love my little blueberry. I only use it for word processing and data entry (MacOffice)... so it's perfect for my needs. I just need to upgrade it a tiny bit to be able to run on our server.
Thanks a ton to all who help!

Hi, and welcome to Apple Discussions.
I bought it running OS 9.0.4 but I also purchased copies of OS 9.1 and OS 10.1.4. I was told that I had to get it up to 9.1 before upgrading to 10.1.4... is that true? … Did I ruin my chances by already installing OS 9.1??"
Since you've already installed OS 9.1, it really doesn't matter whether it was necessary prior to installing OS X 10.1.4.
You only need to update the Firmware if installing OS X 10.2 or greater.
http://docs.info.apple.com/article.html?artnum=86117
Maximum RAM depends on whether the logic board RAM is 32 or 64 MB. According to EveryMac.com, "Apple officially reports that the maximum memory capacity of this system is 288 MB with 32 MB of onboard memory and 320 MB with 64 MB of onboard memory. However, third-parties have been able to upgrade the RAM to 544 MB or 576 MB, respectively, with a single 512 MB memory module."
What specifications do you need to run on the server? What is the size of your hard drive? OS X demands a lot of hard drive space. I would recommend staying in OS 9 if the hard drive has not been updated to 20 GB or more.
Also, you may want to try posting in the iBook (colors) Forum.
You have posted in the iBook G3 (Dual USB) Forum (the forum for the first all-white iBooks).

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