Apple response on RAM issue: "The Apple 4.1.7 and 4.1.8 firmware updates incorporate a number of fixes that dramatically improve system stability and performance. The update also includes a new check that validates whether the installed memory in the machine is compatible. This check was added to help alleviate random crashes and stability issues. The new memory test disables memory DIMMs that are found to be out of specification and DIMMs that cannot be determined to be compatible. As a result, some third party memory that was recognized by previous versions of firmware may no longer be recognized after the updates."
It appears most RAM vendors will replace RAM if you find yours has been disabled by this firmware. Use DIMM First Aid to see if your RAM will be compatible with this firmware or help restore it if it has been disabled.
The iBook Firmware Update 4.1.7 will only run on iBook computers running Mac OS 9.1 from a local drive. If you are using Mac OS X you must boot from a local Mac OS 9.1 writeable partition (not a CD, or network disk) prior to following the update instructions. Firmware Update 4.1.7 includes improvements to Firewire target disk mode, network booting, gigabit networking (on systems with gigabit hardware), and system stability. This update also adds support for additional security options which allow the Open Firmware to be password protected. This update also contains changes from earlier Firmware Updates. This update adds support for 256 megabyte (MB) memory modules and improved support for using a USB storage device, such as an external hard drive, as a startup disk.