I have a 700MHz iMac that I use as a second machine and I'm thinking about making the same swap. I recently tried out a 17-inch 1.25GHz model and I was pretty impressed. There is definitely a big difference in the overall responsiveness of the machine. I think this is due mostly to the 167MHz system bus in the new machines (vs. 100 for the old). You're also getting twice the VRAM, faster RAM, and so on. The G4 processor is the weak link, so every little bit elsewhere helps.
What's particularly tempting is that Apple has refurbished 1.25GHz models for $1,499, and MacConnection had them for just $1,399 earlier this week (now sold out). At those prices I think they're a good value.
My concern about the 20-inch is that you've got the majority of your investment tied up in the display, which you can't move to a new machine. For that kind of dough, I'd be tempted to wait for the next generation of machines, and hope for a G5.