I had the same problem with a G3/266/DT, when installing 10.2 Server. The solution was to put the hard disc in a G4 and install the server software there instead. When it was done I simply put the disc back in the G3 and started it up. No problem whatsoever. It’s been running flawlessly for a month now.
You may have to reselect the network interface again, since OS X seems to recognize by name, not by actual slot.
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