The iMac should be fine to run what you want ... how long will it last? Well, after three years, you are out of warranty ... who knows? could last a while, but you are a bit SOL if it dies. Make sure you BACK IT UP!!!!
I'm running Lion Server on an early 2007 white iMac, 2.3 MHz Core2 Duo, 2 GB RAM. It works fine for home use and it might be enough for a very very small business.
The question is how many clients will be sharing off of it simultaneously. If you're planning on using it with more than one or two clients, you should probably be looking for something with more RAM and CPU power. Also, the lack of anything faster than a FireWire 400 port is a bottleneck when using an external HDD.