It certainly does sound like a failed drive. If you have an external you can boot to (either an external drive or another Mac in Target Mode), and that OS is at least 10.4.11, you can download a great app called SMART Utility (look for it at versiontracker.com.) This app will directly read the self-monitoring attributes of the internal drive and tell you if any of them have suffered failure. It's especially useful for finding out of blocks (sectors) are starting to fail, which almost always gets progressively worse.
If it's the stock drive this iBook came with, it's of the age where it's a candidate for failure.
When you're installing the new drive, be very careful disconnecting the power and speaker cables. I broke a speaker cable connection once and ended up with a mute iBook. I borrowed the hemostat from my fly-tying kit for disconnecting these cables after that incident, and it works well.