Well, if the thing allows a 650mhz officially, you should be able to get away with a 700 or 750, maybe even up to an 800, but I'd be hesitant to go above that. The 700mhz+ processors didn't come out until a few months after the 650, so it is possible that was the fastest available at the time.
It's a 4W difference between a 650 and an 800, so that shouldn't be a big deal, but the 13W difference between a 650 and a 1ghz would be a bit much, I'd think.
.....
About the iBook, the G4s usually aren't as straightforward as the G3s when it came to backlight issues, but there are common problems I know about, and if you're lucky it's one of these, which you can generally fix yourself without much expense: Sometimes the easy fix works, just resetting the PMU. Not often, but sometimes. If the screen flashes for a split second at boot, then goes black, it's usually the inverter. If you get no light at all, it's usually that the inverter cable has broken, and sometimes even shorted out on the hinge assembly and blown a little fuse on the mainboard.