That iMac will run up to Mac OS 10.4.11 "Tiger." The problem is that Tiger is still in high demand and righteous retail disks can cost over US$200.
If you are in the US, call the Apple Store at 1-800-MY-APPLE and ask for a system software specialist. As recently as this January, one poster here reported being able to get 10.4 install disks that way and it should be much cheaper. Don't be surprised to hear "no" and plan on calling back a different day in hopes of getting a phone clerk who knows more tricks.
SUPER-IMPORTANT: Before upgrading a slot-loading iMac like yours to any OS version higher than 10.1, you MUST first update the firmware to 4.1.9 using the download and instructions in this link:
http://support.apple.com/kb/DL1283
RAM: the description you posted says that computer came with 256MB RAM, a lot for OS9 but paltry for OSX. If you install OS10.3.9 Panther, you need a real-work min of 384MB; for 10.4.11 you need 512MB. More is better in either case. That model can handle two 512MB modules for a total load of 1GB RAM:
http://eshop.macsales.com/shop/apple/memory/iMac/G3_450MHz_500MHz_600MHz_700MHz
I've bought all our Mac RAM from the firm I linked for over a decade--including for our G3 iMac slot-loader-- and have no complaints with their prices or customer service. I have no financial relation to that firm; I'm simply a satisfied customer