Have you tried a different battery? It kinda sounds like the battery to me.
And per Apple... **See below.
 I have had my ibook for 15 months and I am getting about an hour and a half
per full charge. Unfortunatly, I don?t have warranty or apple care. I am
going to have to spring another 129 to Apple for a new battery. My old
Powerbook batteries (3400c, 520c) seemed to last forever. But this one has
degraded badly over the last few months. At first it was slow and I didn?t
notice it. Now its just falling off. I could get 2hours about three weeks
ago, now it 1.5 hours.

Try a different battery before you ship it off to APPLE.

Brian O'Neal






------------------------------------------------------------------------
TOPIC 

This document provides troubleshooting steps for an iBook that operates
normally when plugged into AC power, but may not run on battery.

------------------------------------------------------------------------
DISCUSSION 

Symptom 

The iBook which operates normally when plugged into AC Power (wall outlet),
does not operate using a battery.

Products Affected

*    iBook
Note: This document only covers the iBook through iBook (FireWire)

Solution 
Try the following steps in the order listed to verify if the problem is
related to the battery or other component of the iBook.

If the battery does not appear in the Control Strip or has a red X through
it, you may want to try the Battery Update 2.0 available for download from
the Apple Software Updates Web site at http://www.apple.com/swupdates.
.
1. Ensure battery is fully charged by using the proper power adapter for
your iBook computer. If it is not charging, try a different AC outlet. The
power connector on the iBook will glow amber if the battery is accepting a
charge, it will glow green once the battery has reached full charge. If the
power connector is not glowing, you may have an issue with the AC adapter or
AC outlet. 
2. Reseat battery to ensure it is making good, solid contact with the iBook.
3. Reset power manager described in article 14449: "PowerBook: Resetting
Power Manager". 
4. Try a different battery.
5. Replace the battery.


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