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Had the same problem and found this post on another thread, which worked for me. try it:

Low screen resolution on G3 iBook

The complete display information for G3 iBooks is not always detected, leaving the system with only 800x600 as the resolution. This can be overridden by editing the Xorg configuration (e.g. sudo gedit /etc/X11/xorg.conf from the Terminal) and replacing its contents with the following:

Section "Device" Identifier "ATI Rage 128" Driver "r128" BusID "PCI:0:16:0" Option "UseFBDev" "true" EndSection

Section "Monitor" Identifier "Configured Monitor" HorizSync 60-60 VertRefresh 43-117 EndSection

Section "Screen" Identifier "Default Screen" Monitor "Configured Monitor" Device "Configured Video Device" DefaultDepth 24 SubSection "Display" Depth 24 Modes "1024x768" "800x600" "640x480" EndSubSection EndSection