Unfortunately, you cannot install Mac OS X from an external USB drive on PowerPC Macs.
If you have a Pismo Powerbook, you should use an external Firewire drive instead (you can also use another Mac with an internal CD or DVD drive by activating Firewire Target Disk mode on that machine and connecting it to your Pismo Powerbook).
If you have a Lombard Powerbook, you have to use an internal drive for the expansion bay or an external SCSI CD-ROM drive.
You could also use the SCSI Disk Mode on the Lombard, connect it to another PowerPC Mac that is compatible to OS X 10.2 and has SCSI and a CD/DVD drive and install OS X on the "external" Powerbook hard drive.
The last way would be to remove the hard drive from the Powerbook and install it into an external firewire enclosure like
this one, connect it to a Mac that's compatible with OS X 10.2 and has Firewire and a CD/DVD drive, install OS X to the external drive and finally reinstall the hard drive in the Powerbook.