Yes it is possible to upgrade the iBook to a CD-RW drive. I have done it, although I wouldn't recommend it.
You have to remove 30+ screws, carefully remove the case, take of conducting tape that holds the aluminium foil screen. The end result is something that is obvioulsy tampered with. The job took me about 3 hours (not including the time to look for the keyboard latch (very-very strong) magnet that accidently flew into the new drive). Although expensive, look at www.applemacparts.co.uk for cost of bits. You will need another plastic white drive tray end cover, as the one on the CD is not compatible with the Toshiba combi drive used by apple.
The iBook does have firewire, and this is probably best way to add an external CD-RW drive (some are even bus powered). For data backups I use the iPod.
When I get home I'll update this post with pointers to full details on how to do the upgrade.
I saw this offer the other day in my local store, i was tempted, until I saw that it was a g3 :-( I have a g4 tower at home already and that in itself is as slow as a dog. Even the low rated G5 that we have at work is not that much faster than the G4 dual I am using. IMO get a cheap PC laptop for about £300 that is really all this offer is worth. After using macs for around 10 years they are no way near as fast for the money as PC's. I use a sony 400mhz for net and email with WLAN to my office. Cheap and faster than the mac.
For the love of god noooooooooooooooo!
To make this worse you have to deal with the after sales at PC World which is seriously lacking, you have been warned!