The message you get is not because of the incorrect CD's you used, it was because the Firmware is actually out of date and in need of updating.
The disks you used were probably OS X disks and most System 9 machines needed a Firmware update to be able to run OS X.
This iMac is almost certainly running a piece of software that limited the use of the machine, no such functionality was ever built in to System 9.
I'm trying to think of the name of the piece of Apple software that was used for creating accounts and limiting access to certain areas. Right now the name escapes me.
With a System 9 boot disk you could boot the machine, format the drive and move on from there.
My IT class has an old iMac (G3, slot-loading, Mac OS 9) that the teacher lost the administrator password to. We don't even know if anyone in the school knows what it is. I'm not sure what version of Mac OS 9 it is, but we need to find a way to reset the password without completely messing up the OS. I have a near-identical iMac at home (mine's tray-loading) and a set of PowerBook G4 installation disks, so I tried testing the Mac OS 9 disk on that... it says my Mac's firmware it out of date. I'm not very familiar with Macs, but it's probably just because that's not the computer it was designed for... is there any other way to reset the password on the admin account?