They do draw out some heat. If you were to touch the top of the so-called "carrying handle," you would feel an almost scalding sensation on your hand, or finger (heat is being dispersed through the top via holes in the carrying-handle). There are also convection air-holes at the bottom of the unit, so it's wise to keep it tilted upwards for more heat to dispense. Supposedly, the Bondi blues had a built-in cooling fan of some sort installed at the bottom, but from what I hear, these didn't do an adequate job of cooling the system, and were removed when the G3-series iMacs were introduced.
Again, this is another example of Jobs' engineering at its best. To hell with practicality- focus solely on design/elegance to woo customers/critics, and when the unit does fail (shortly after the warranty coverage has expired) force the customer to upgrade to a newer iMac, and dispose of the old one (as its too costly to have it inspected professionally, and a pain in the ass to repair manually).
In my opinion, the 5200+ series Macs had it right (for the most part, anyway). The logic board was easy to remove (simply remove two screws in the back, and carefully slide out the board) in order to perform necessary hardware upgrades without the fear of being zapped by the CRT, and it had an adequate cooling system to avoid extreme thermal expansion of the plastics to the point where they begin to crack upon years of stress.
The first-gen iMacs may be better looking than the old 5200 Power Macs, but they were poorly built, unfortunately.