You're trying to start Classic from within OS X, right? I ask because I hear people refer to OS 9.x simply as Classic, whether they're starting up with it or starting it from X. The following comments assume you are running it from X.
Most importantly: do you have OS 9.x installed on your computer? (can you start the computer in os 9?) If you do have it installed, can you find the folder called "System Folder" with a 9 on the folder (NOT the one just named "System" with the X on the icon)?
It sounds like you either don't have 9 installed or you lost your 9 system folder. If you did just throw it away somehow, there's one on the cds that came with your computer. But, don't somehow replace the "System" one, use the cd with OS 9 on it.
Hope this helps
leesa