NOTE (11/5/11): This was one of my first (somewhat) successful iMac Mods. While the Surface Acoustic Wave Touchscreen is one of the best I have used, overall this method is neither elegant nor stable and is not recommended anymore. The wires coming out the "shelf" on the back are not just ugly, but they make this mod very fragile. This lasted only 2 months when I started noticing flickering video. The video cable occasionally got caught and when you moved the monitor, it would pull on the controller board. Eventually it went altogether. See my "Summary" post for better alternatives.
Like many people I have always thought that the iMac G4 was one of the most attractive computers out there. The computers aging processors based on PowerPC architecture make them difficult to upgrade without re[placing. Because the monitor connects to its controller through a proprietary connector its difficult to use with upgraded equipment. My solution was to put a shelf on the back for the connectors. I then upgraded it with a surface acoustic wave touch screen, its high resolution does not distort the image at all.
For the base, I initially wanted to make it a Core 2 Duo all in one. Unfortunately, there is a lot less space in there than you think. Its very impressive how Apple constructed it. because it was convection cooled, the parts literally stacked on top of each other. They fit together like a puzzle. The disk drive alone probably takes up 70% of the volume in the base. Many people have thought about putting a mac mini in the base, even that won't fit without heavy modification. A mini itx board won't fit either. A nano or a pico board with an atom processor may work, but that is not really an upgrade from the G4 processor. So, I decided to keep the computer separate. I instead put a blu-ray drive in its base to make it an external blu-ray drive.
I added the original speakers connected to a Griffin Power Wave Adapter and now I finally have an updated iMac G4 on my desk. It's connected to a dual booting Windows 7 / Mac OSX Dual Core machine.
You Tube Video
Story on Hacked Gadgets