Somewhere on the net I found a company that makes upgrade 1U server boxes for iMac G3 innards. This would be a great route for you as the fool things are tiny and take all of your iMac's guts, except the monitor, and they are pretty cheap ($400). I just can't remember where I found them.
Also, sorry my comment on #3 above threw you off. I did not mean to make it seem as though the B&W would not run OS X.
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