Can I change out the internal RAM on 1.33GHz iBook

No, you can't remove the RAM that comes soldered to the board in an iBook. It's not 100% clear from your post which machine you have, but if you've got a 14" 1.33GHZ showing 256MB, you should have 256MB on the board and nothing in the slot, in which case you can install a 1GB module. You can verify the RAM configuration by going into "About This Mac" and "More Info", and then clicking on "Memory", where it will show you what is on the board vs what is in the slot.

I'm not quite sure what the problem you're having is...you state that your RAM is not recognized, but that you haven't looked inside yet, which seems contradictory. I assume you mean you've installed the 1GB module but it didn't work, and you haven't "gone inside" to find the embedded 256MB. If that's the case, the 256MB is on the board and non-removable, so it's not worth looking for. The problem is likely that the 1GB you bought is incompatible.

Later iBooks should be using PC2700 333MHZ RAM, and earlier ones are happier with PC2100 266MHZ RAM, although technically either should work in any of them. There's lots of RAM out there, though, and lots of variations that iBooks are for some reason picky about, regardless of correct specs. But generally, with a 1.33GHZ you should stick with PC2700 333MHZ in order to maintain your maximum bus speed.