Hard drives are a dime a dozen, and vary greatly in terms of lifespan. The Lacie 40 meg HD in my SE is still going strong after 23 years (this is the original drive, btw), as well as the Seagate ST-225N in my Apple SC20, which is about 25 years old. In contrast, the 320GB Hitachi Travelstar drive in my 6 month old MBP died about a month after receiving it (this was a replacement laptop from Apple). Although Hitachi drives are fairly reliable, this one was clearly a lemon. The one I have now (another Hitachi 320GB) works perfectly. So you can see where I am going with this.
Getting back to the G3, as an owner of a 2001 Graphite, the 60GB HD (which is the original, btw) makes a hell of a lot of noise, and sometimes fails to boot the OS (I have been contemplating that the System Folder is corrupt, however the loud noise and occasional "clunking" sound is a good indication that this drive is on its way out- not much of a loss since I have no documents/other personal information saved on that drive). I would recommend replacing the drive, not just because of the issues you have been having with the Finder, but because of all of the stress that the drive has gone through over the past decade due to extreme heat buildup (these CRT iMacs have a very poor convection cooling system- even the Bondi blues with the built-in fan do a lousy job in keeping the unit adequately cool). For a replacement HD, I would recommend a 5400 RPM drive either from Western Digital (Seagate, I hear, is pretty lousy nowadays), or from Hitachi. Or simply get an external USB drive, and boot the OS from there, which will eliminate the problem of removing the HD from the iMac.
Just my $0.02