KBear, your topic title just said that it was "out of warranty" and your post didn't mention anything about "extended AppleCare" so I assumed that you were referring to the standard one-year warranty period...
The initial symptoms point to a drive failure. Assuming that the iBook is over three years old, that sounds about right for the lifespan of a standard portable Mac harddrive. Your friend is actually rather fortunate because more than a few G4 iBook drives fail before the end of three years. (My G4 iBook drive died after 22 months; my G3 iBook drive failed just days shy of three years.) I would be Very Surprised Indeed if Apple were to replace an internal drive after three years of use, whether or not the iBook's extended AppleCare had just expired.
Expanding on DaveF's suggestion... I would try booting from an external Firewire drive and see how things go. If it is just a drive failure, booting from the external drive will work most of the time. If it is something else like the logic board then the problems will likely persist. If your friend lacks an external drive and you have one then try booting from yours and running it for awhile. Booting from a system CD and running Disk Utility is also an option. It isn't clear to me whether you had problems actually booting from the DW and TTP CDs or the problems started when you were running the utilities on the CDs. If you could not boot from the CDs (assuming that they have compatible system folders) then I would start getting concerned that the drive might not be the main problem. But if the problems came while running DW and TTP then that indicates a bad drive that cannot be repaired using software.
If you decide that it may be a logic board failure, then I would check with Apple to see if the iBook is covered under an extended warranty program for G4 iBook logic board problems. And if the iBook happens to fall just outside the coverage period for such a program (not to mention the extended AppleCare) then I would begin to make some polite noise about getting the iBook repaired by Apple as a "goodwil gesture."
And to RobW: You're Very Welcome!