The looseness is almost certainly a broken hinge. There are two of them, and they do break. I've had to replace them on my Wallstreet in the past, and I've got looseness again. Like Nedry, I don't really care to fix it. If the other hinge goes, and I get a completely floppy screen, then I'll fix it. But I'd like this to be a working machine for years to come, and there's only so many times I'm going to redo the hinges.
You basically have two options. You can find another book with good hinges and just swap the screens.
Or, you can just get the hinges and replace them.
Here's a set. $15 on eBay. If I were you, I'd buy them simply to have the spares.http://www.ebay.com/itm/Powerbook-G3-M7 ... _500wt_841
Here's a set for $12.35 shipped.http://www.ebay.com/itm/Apple-PowerBook ... 559wt_1060