Can't reset PRAM and reinstall OS!
Not sure if this is too late of an answer. I know you've already attempted to disable the password, but try these steps exactly:

You can remove the firmware password by changing the RAM configuration, booting up to the startup menu, shutting down and changing it back. Basically, if you have two 1GB chips of RAM in there now, you can remove one of the chips, start up holding alt/option, shut down and put the other chip back in. This will remove the firmware password.

Now, you can follow these instructions for doing the erase and install.

Good luck!