Thanks for posting the extra information.
The only thing that gives me heartburn is the size of the hard drive, especially as you want to run CS. That plus the OS can eat a huge amount of the free space.
OSX needs a certain amount of fee space--the more the better--to efficiently use its Virtual Memory (VM) system. The X version of VM cannot be turned off as it can in OS9. CS, especially PhotoShop, will need room for its own scratch disk function. I'm afraid a 10G hard drive is not going to give you much joy under those conditions, even if you do a minimum install of OSX to maximum space.
Fortunately, adding larger drive to this model is a 10-30 minute job depending on your skill and nervousness levels. We have the identical model; when our daughter needed a computer fast, I pulled the iMac 400 out of storage, replaced the 10GB drive with a low-mileage 60G I had left over from another project, popped in a fresh PRAM battery, and installed Panther. The hard drive swap took only about ten minutes even though I'd never worked inside an iMac before. I also had the joy of being able to install Panther to a perfectly clean volume.
Now she has a competent computer that only needs more RAM (I did not have any extra PC100 RAM lying about). For her needs--mostly surfing and e-mail--it's fine like it is, but she may get RAM for Christmas.
You can install a parallel ATA (or PATA) drive up to 120GB is size. Those size drives are rapidly falling in price. Even going to a 40G version would by you a lot of performance.