It's been alluded to, but never said outright. I'm hoping to save someone some time. When installing OS X on a PowerMac G3 All-in-one, make sure that your first partiton on the hard drive is no larger than 8gb. If it is larger, you won't be able to install OS X. I could actually boot from the OS X CD, but when it came time to choose the hard drive, it would not let me select the drive. I partitioned my 12gb hard drive into two partions, the first at 8gb, the second at 4gb, and VOILA, things worked great. Computer is not too bad for performance.
I spent almost 4 hours figuring this out, so I hope it saves someone some time.
[Editor: Although Apple has a technote on this, it's not entirely clear that OS X must not only reside on a partition that's on the first 8gb of the drive, but that the partition itself must be no larger than 8gb. There are some other tips here for dealing with early G3's; search on "Beige G3" for a couple of different articles...]
Mac OS X Hints