1. The main problem with downloading an OS installer is the difficulty of making sure it is un-compromised throughout the download & burn-to-disk process. Any problem in the computer that resulted in a flawed DVD could leave you with an inoperable computer when you tried to install it. The Snow Leopard installer is also difficult to duplicate: it is actually a hybrid disc with both Mac & Windows partitions, the former for installing Snow Leopard & the latter for installing Windows drivers for use with Boot Camp Assistant.
2. Most major computer retail store chains sell Snow Leopard. Try the third option at
http://www.apple.com/buy/ to find one near you or do a search with Google or your favorite search engine.
3. The system requirements are listed at
Mac OS X 10.6 Snow Leopard - Apple Store (U.S.) & many other places. Basically, the only one that your iMac might not meet is 1 GB of
working installed memory. To check, run System Profiler & click on the "Memory" item. As long as it shows at total of at least 1 GB for the installed modules & they each say "OK" in the last field, you should be fine.