Start the Powerbook up off of the OS X installer disk. If it doesn't hang, then its a software problem as you guessed. While started off of the installer disk, open Disk Utility, from the pull down menus, and repair the startup drive and the permissions, then reboot.
Next run Apple Software Update and install all the latest versions of the OS and applications. When finished repair the permissions again and restart to see if it hangs. Hopefully, all will be working as it should. If not, post again and we'll give you some other solutions to try.
Tiger is an awesome OS and should work great with the 17" Powerbooks.