HWTech wisely mentions the video and capacitor issues. The video issues--bad displays installed by the factory that affects a high percentage of total production--started with the G5 iMacs and continues into the early Intel iMacs like yours. They are easy to spot as a) they all came from the same factory, and b) the computer's serial number starts with a "factory code."
Units from the factory that had so many issues will have serial numbers starting with "W8." If yours has that, I would not spent a dime on it.
I do not have a code for units that were affected by the bulging capacitor issue but you may be able to see some of them thought the RAM door:
Look at the images here for examples of what to look for:
Imac Bad Capacitors - Image Results
If there are not video defects, the serial # is not a W8 series, and the computer still has iTunes, you can take the approach that a friend did: Burned his CD collection to iTunes, got a $20 pair of external speakers, and used it as a jukebox. He turned on the iTunes visualizer to enhnace the coolness.