I don't know if Mac OS will boot off a USB drive or not. And even if it does, you wouldn't want to since the USB ports on a G3 are USB 1.0 and really slow.
Is the G3 the only Mac you own? If you have another Mac with a DVD drive in it, you can put the OS DVD in that machine, boot the machine in target mode (essentially turns the Mac into an external hard drive) and then connect your G3 to it via firewire. You would then have access to the DVD drive across that firewire cable.