As far as gaming, I'm not sure if the iBook's graphics will give you the best quality. I've read around the PowerBook forums that even PB have a hard time with games such as Halo and/or World of Warcraft. Although I've never personally tested it out with gaming on my PowerBook (as well the iBook I owned a month ago), it is highly unlikely that you will get the performance result you're looking for.
As far as Photoshop and other applications, 512mb may be enough, but you'll be cutting it close if you plan to run multiple programs at once. I say this because even working on a 12" iBook w/ 1.2ghz and 768mb ram, I would notice my activity monitor saying I've used about 75% of my ram running Photoshop, InDesign and Illustrator at once. If you can, at least slap on a 512mb ram to bring yourself to 768mb. That may give you an extra breathing room for your applications.
As far as Photoshop and other applications, 512mb may be enough, but you'll be cutting it close if you plan to run multiple programs at once. I say this because even working on a 12" iBook w/ 1.2ghz and 768mb ram, I would notice my activity monitor saying I've used about 75% of my ram running Photoshop, InDesign and Illustrator at once. If you can, at least slap on a 512mb ram to bring yourself to 768mb. That may give you an extra breathing room for your applications.