My iBook 2.3 is in repair now for the same problem, there seems to be some electrical interferance in the video adapter or something.
Seems to be quite frequent a problem.. a friend at the conference I was at told me that a friend of hers had the same problem too and Apple diagnosed it as Ben mentioned - video chip on logic board died. Mine's going in tomorrow - will send in an update once it gets back.. thanks a lot everyone for all the help..
nirmal