Choosing between 21.5 or 27...

Id wait for the intel quad core first if you want to get a boost of performance, by all means the i5 quad core is a 266gighertz but it has turbo boost so it would go up to 3.2 I think and the quad core i7 would be 288 gigahertz and it has hyper threading which would work like if it had 8 cores instead of 4 cores, and turbo boost up to 3.4 gighertz, i am planning on getting the i5 but I am eager to know what are the differences in rendering power when it comes to the i7 quad core, what are the time percentage differences and would it be noticeable.
I am in your situation also so we should wait till december.

There is also a matter of pixel density, pixels per inch (PPI). Your 20-inch iMac was about 99 PPI. The new 21.5-inch iMac is about 102 PPI. The 27-inch iMac is about 109 PPI. So on the 27-inch screen, the same objects will appear about 10% smaller, compared to your 20-inch iMac. It also means things will look 10% sharper. So it's just different, not necessarily an advantage or disadvantage. If you are close to an Apple Store, you should go take a look in person.

Either choice will be noticeably faster than your previous iMac. So if your old iMac was adequate for your use, I think either choice would be more than sufficient, and the smaller one will save you some money. But if your previous iMac was straining a bit to keep up, then you may want to the faster choice.

The new iMacs have four RAM slots (instead of two like all previous iMacs), so you can buy it with the standard 2x2GB and see if that is enough. Then, if you find you actually need more, you can add another 2x2GB, without replacing (wasting) the installed RAM. You can buy the upgrade from places like OWC

http://eshop.macsales.com/item/Other%20World%20Computing/8566DDR3S4GP/

for less than what Apple charges to have it pre-installed.

My older iMac from +late 2006+ has only 128mb VRAM, yet it can drive a 1920x1200 display off the Mini-DVI port (plus the built-in display at 1440x900). The new 21.5-inch iMac can drive a dual-link 30-inch 2560x1600 Cinema Display off its Mini DisplayPort (plus the built-in display at 1920x1080). So the amount of VRAM is not the most important factor for performance, I think. The new 27-inch iMac has to be able to drive its built-in 2560x1440 display PLUS a dual-link 30-inch 2560x1600 Cinema Display off its Mini DisplayPort, so 512mb of VRAM probably helps for someone who wants such a maximized setup. The real question is (if you are only using the built-in display), how much better is the ATI Radeon HD 4850 versus the ATI Radeon HD 4670. I don't know...

I think either iMac will provide be a significant improvement over your previous iMac. So I think your decision should be based on whether you want the big beautiful 27-inch display or save some money with the still very nice 21.5-inch display. Note: Compared to the old iMac's 20-inch display, the 27-inch display has more than double the number of pixels.

I have the similar issue in selecting my next iMac and I used to have the same old iMac as yours. If you are happy with performance of older ATI HD2600 graphic processor, newer ATI HD4670 certainly has higher performance (refer to technical details in ATI/AMD website) and it should be sufficient for your work on video editing unless you want ultimate performance of ATI HD4850. You also do not need extra screen area of 27" display.

I would suggest (for my next purchase as well) taking 21.5 inch iMac with default ATI HD4670 GPU (256MB Video RAM) , Core2Duo CPU clock rate upgraded to 3.3GHz and RAM size upgraded to 8GB. This configuration will give you best cost/performance ratio and cater to your needs at the same time. Though Intel 2.66GHz quad-core Core i5 processor has Turbo Boost feature to boost clock rate from 2.66GHz to 3.2GHz on demand, but that is possible with two cores only with another two cores shut down. So in the end, a 3.3GHz dual-core can break even with 2.66GHz quad-core in term of maximum performance with maximum clock rate. Of course in normal operation, Mac OS 10.6 able to fully utilize four cores of Core i5 processor for better performance through Grand Central Dispatch.

To me the only consideration for 27" iMac display is to use iMac's display as Monitor for external video sources such as Blue-Ray player or set-top box through HDMI to display mini-port adaptor (sold separately and not yet available).

I'm also trying to choose between the 21.5" and 27". All the inputs here are very helpful. I still have one question. When I purchase my previous iMac 20" the first week it was released in 2007 (i think), I was very disappointed with a sort of blue hallow at the bottom and top of my screen... like a magnetic field or something. I was told that the problem was only on 20" display and that the 24" version did not have it because of the additional space inside the body of the machine.

As a heavy user of photoshop, colour accuracy is very important to me. Is anyone aware of a similar problem with this new design? Is the blue cast still a problem on the smaller display?

I'm not sure what you mean by "optically." In terms of pixels, the old 20-inch display will completely fit inside the new 21.5-inch display, with room to spare.

In terms of physical size, the height of the new iMac's display is just about equal to the old iMac's display (the old iMac's display may even be slightly taller); the new iMac's display is wider by about 1.8 inches.

The shape is slightly different; the new iMac's display is extra wide like an HDTV screen. In fact, 1920x1080 used by the 21.5-inch iMac is the same resolution as an HDTV at "1080p."

In another post on this forum I referenced to this blog post of mine with thoughts on choosing between the 21.5" iMac and the 27-inch model: http://bassfeld.posterous.com/should-i-buy-the-215-inch-imac-or-the-27-mode

*Old iMacs*

20-inch: 1680 x 1050 pixels or 1.764 Million pixels in a 16:10 aspect ratio
24-inch: 1920 x 1200 or 2.304 Mpx, 16:10 or 31% more than the 20-inch

*New iMacs*

21.5-inch: 1920 x 1080 or 2.073 Mpx, 16:9 or 17% more than the 20-inch
27-inch: 2560 x 1440 or 3.686 Mpx, 16:9 or 109% more than the 20-inch

No.

The display technologies are completely different.

The 20-inch iMac had a not very good display. The backlighting was Cold Cathode Fluorescent (CCFL) and the viewing angle was limited.
The 24-inch iMac also used CCFL, but had a larger viewing angle and better color reproduction.

The new iMacs use Light Emitting Diode (LED) for the backlight. It is more uniform and provides better color handling.

The 21.5-inch iMac is a huge step up from the 20-inch iMac in every way.