It's been a while since I've reinstalled OSX on my IBook but I can't remember being asked for a password :eek:. I'll have to look at this again.
Anyway, assuming you have the Mac OS X installation disks that came with the IBook then you should be able to just put it into the computer and start installation by holding down 'C' when the computer starts but there should also be a way to reset passwords using this disk.
Google should be able to help: http://www.google.coam/search?hl=en&q=mac+os+x+reset+password
Hope this helps,
Mark.