Now I know you're missing your 10.3 install disc, but to really do this properly, that's just what you need. More on that in a moment.
The typical sequence would be to boot from your install disc, run Disk Utility to reformat (and depending on how paranoid you are, do a 1- 7- or 23-time random-whole-disk-rewrite—that's basically what @Nathan Adams' DBAN software does, except this is built into Disk Utility) and then reinstall 10.3 and whatever iLife software came with it from scratch. Then on the first boot, just shut down when it asks you to create your login account. To your buyer, your machine will behave like new.
Of course, this requires that you boot from something other than the iBook's internal HD. An attached external HD imaged with a 10.3 install system would work, as would the 10.3 install CD. Though technically it's legally questionable, I can't see anything wrong with torrenting and burning a 10.3 install CD seeing as how you do in fact own the license for that software as it came with your iBook. Though some may disagree with me, I know many a tech who would find this to be an entirely legitimate method of achieving a wipe-and-reinstall.