A standard PC-formatted disk will work on a Mac - including an iMac G5 running 10.4 - without any problems.
My bet is on a dying optical drive in the iMac. Do other disks work fine?
In any case, just use a USB stick instead.
(also, 10.7 won't be out until next summer. We're at 10.6.x, and Perian works just fine.

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