Flashing Question Mark Folder on iBook

Got this on our iBook which we bought more than 4 years ago.

Basically when we boot it up, there is the familiar Mac boot up chime. Then the screen greys out for half a minute, and then the flashing question mark inside a folder appears.

If you see a flashing question mark when you start your Mac, it's probably because it can't find the system software it needs to start up.

D'oh. You can actually hear the hard disk working hard during the bootstrap process -- looks like our hard disk is fried. Pressing C to boot into installation/rescue CD does not work either, and all I get is a "kernel traceback" page.

It looks like the only way of resurrecting it is by replacing the dead hard disk. However the brilliant designers at Apple has decided to make it almost impossible for an average dude like me to do.

Maybe it is time to shop for another computer.

Update: Here is a "screenshot" of the kernel panic.

Kernel panic

It happens when I tried to boot from CD. I have tried to clear the PRAM and NVRAM but error still occurs. There could be bad memory module. I took away the 512MB installed, left it with only 128MB, and it still could not boot. Sometimes it dropped into OpenFirmware saying something like memory error.