Recently I re-celled a pack for my Pismo, and noticed initially that the machine would not startup at all, not even momentarily, from the fully charged pack. I had previously tried some firmware resets to the pack prior to re-celling as discussed in
http://www.maclife.com/forums/topic/51129/1
and
http://www.macintouch.com/laptopbatt.html
but this somehow caused me to have to reinstall 10.3.9 a bit sooner than I had planned. Anyway,...
Like your experience, when the machine was running from AC and the pack was inserted, the pack was not recognized. I then removed and reinserted the pack several times in succession; I am not sure but I think I got the symbol to change from the battery with an X inside to a battery with a plug symbol inside. But never the battery outline with the squiggle inside that indicates charging and certainly never any non zero capacity available indication. When next as an experiment I pulled the AC plug the machine continued to run on the non recognized but somehow existent battery! I let it run until it slept, plugged in the AC adaptor and recharged it which seemed to reset the gas gauge and started proper recognition. After a few such cycles I am getting 2 hrs 25 minutes of surfing with the airport card enabled from a $2 investment in scrap batteries.
The suggestion to short out the + and - leaves me a bit in shock, although I note with the pack out of the machine there appears to be some kind of protective disconnect going on, no volts on the outer terminals, at least with my particular version of the smart circuits (there are at least two variants of the pack internal power manager electronics).
Edited post: Previous link to laptop lithium fire removed, it has been corrupted with an ad server overlay at least for now. Anyway, although many internet lithium fire pictures are thought to be hoaxes, I have found technical reports explaining and verifying that above approximately 130 deg C spot internal temperature the cell chemistry goes exothermic, and nothing can stop it from there. This is good reason to respect the lithium ion cell spec sheet limits on current and voltage, not just in normal use, but also in momentary bench experiments.