I finally place the order for the replacement CD/DVD drive. 

When I removed the drive cage, I realized that those iMacs were using standard 3.5" HDD. I do not know why, but I always was under the impression that the G4 iMac was using portable 2.5" HDD". So I followed your recommendation of replacing the internal 40 Gb by a 160 Gb drive at 7200 RPM that I removed from a G4 tower. Once I receive the CD drive I will install it a do a clean install of 10.4. 

I also removed a 512 Mb RAM board to upgrade the RAM in it from the G4 tower. It now have 640 Mb of memory. I just don't have any SODIMM of 512 Mb to install for the user replaceable module. If anyone have one, I'd gladly take it. 

The one thing I'm looking for is a replacement battery for the PRAM. I remember buying a pack of 10 from a guy in this forum, but for some reason I can't figure out where I stored them... That sucks! The one in the iMac is showing a 3.2V instead of the expected 3.6V, and its loosing time and date each time it is shutdown. 

Other than that, the machine works just fine.