I created an image using Disk Utility by way of the Restore function and used a USB hard drive. I do it all the time when I retore old macs. Its a little slow using USB 1.1 but it works and no extra software requred.

Do the following:

1. Run disk utility

2. Select the restore Tab.

3. Drag your existing hard drive to the 'Source' area

4. Drag the external Hard Drive to the Destination area (make sure it is empty as it will wipe the drive).

5. When its done, you restart and boot from the Install DVD.

6. Load Disk Utility under the menu.

7. Drag the External Drive to the 'Source' Area.

8. Drag the new Internal Drive to the 'Destination' area.

9. When its done, restart...and you are done!

Hope that helps!