The Tiger disk your friend has got with her MacBook will not work - it's an OEM disk, working only on that generation of MacBooks. This likely causes the kernel panic you are experiencing. The code is has is based on Intel processors, and as yours is PPC, it is one more reason for it not working (as OEM disks have no reason for universal code).
You can install 10.3 the version that came with your Mac or newer, or 10.4 retail, or 10.5 retail build. If you have completely lost the 10.3 disks, I suggest getting 10.5, after making sure you have enough RAM for it (min 1 GB, the more the better). Retail disk, not ones bound with a Mac.