Is this your model? http://www.everymac.com/systems/apple/powerbook_g4/specs/powerbook_g4_1.25_15.html
If so, then the newest version of the Mac OS that you can run is 10.5.x (aka Leopard). I don't believe that Apple sells Leopard anymore, but you could try calling and asking. Assuming that they don't sell Leopard any more, then realistically the only way to get it is to buy it used from a site like eBay. It does look like there are also some sellers selling it on Amazon: http://www.amazon.com/Mac-OS-Leopard-10-5-10-51/dp/B0012RAVRC/ref=sr_1_1?ie=UTF8&qid=1399404829&sr=8-1&keywords=mac+os+leopard+10.5
Note that if you do buy it used, make sure the disc looks like this:
Not like this:
The grey label CD/DVDs are model specific, so unless you happen to find one for YOUR SPECIFIC model, it will not work on your computer. The "colorful" labelled CD/DVDs are the "retail" version of the Mac OS and will install on any computer (that will run that specific version of the Mac OS).
As to hardware upgrades, you can upgrade the RAM rather easily. If you want to do so, then here is the RAM you would use (assuming the link above is your correct model):http://eshop.macsales.com/MyOWC/Upgrades.cfm?model=187
You could also upgrade the hard drive, but since it is an IDE/ATA drive rather than a SATA drive, realistically you are likely better off just using a FireWire 800 external drive for any additional storage that you need. I say this because the largest 2.5" IDE drive you can get is a 320 GB drive, it will cost you quite a bit more than an external FireWire 800 drive with MUCH more storage space (here is a 1.5 TB FW 800 drive that cost less than a 320 GB 2.5" IDE internal drive: http://eshop.macsales.com/item/Other%20World%20Computing/MS8U3H5T1.5/
), and upgrading the hard drive on this model is on the difficult side (aka not for the faint of heart…here is a guide if you want to see what is involved: http://www.ifixit.com/Guide/PowerBook+G4+Aluminum+15-Inch+1-1.5+GHz+Hard+Drive+Replacement/227 ).
As to reseting it to "factory", you would need the recovery/re-install discs that came with it for that. If you did not get those discs with the computer, then in theory you might be able to buy them on eBay, but they will be the "grey" label CD/DVDs and you will need to make sure you get the discs for YOUR EXACT MODEL. More than likely, your better bet would be to get "retail" Mac OS discs (either 10.5.x or even 10.4.x) and using them. It will not be completely the same as a "true" factory reset, but actually might be better as a set of recovery CD/DVDs for that model will actually only install Mac OS 10.2.7.
As to the PPPoE error, what kind of Internet connection are you using? DSL? Cable? Fiber? If it is DSL, does your DSL provider use PPPoE? If so, then it is possible that the older OS version is not 100% compatible with your DSL system (i.e. it works, but produces an error that does not really effect things). If you don't have DSL or your DSL provider does not use PPPoE (not sure if that is even possible…I have always had cable), then it might be a network setting that is messed up.