First, this iMac is NOT a G5, but an Intel iMac (G5's were Power PCs). Here are the specs for the model you are talking about:
http://support.apple.com/kb/SP28
I'd say from a quick check of ebay completed auctions, the price is a bit high for a four year old computer out of warranty. It appears to have come with Mac OS Tiger (10.4). If you decide on it, make sure you get the original install discs - I wouldn't consider it if they weren't included.
You'd get more power of course, but I'd add another $100 or so and go for a much more powerful 20" 2.4 GHz, model MA877LL from 2008 - I just saw one on the local craigslist for US $600. This one should suit your needs for some time.