If the machine is for personal use then I would say that you're pretty much in the clear. Things like this are only really dodgy if you are using an install of an OS or other software for commercial purposes without having bought the software, since you are technically using unlicensed software for financial gain. For personal use though there is virtually no chance of any trouble coming from it.

10.4 is definitely the slickest version of OS X for a 450MHz dually, Leopard would probably be a bit too slow on it.