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Correction -- I mean to say "put the computer to sleep, wait a while, unplug the mouse then hit the trackpad/button"

I have exactly the same problem with exactly the same iBook. My solution is to put the computer to sleep, wait a while, then hit the trackpad/button. If it wakes up, it worked. If not, repeat until it does. Sometimes takes a couple of goes. After you restart you'll probably have the same problem.