1) neither the logo or the button light up. The reason the logos on Apple laptops light up is because of the light from the screen backlights.
2)Yes, the iMac has built in speakers, located on the bottom edge of the unit, hence invisible. They are pretty decent for built in speakers, though lack bass. If you want to listen to some serious music, id get a decent pair of externals.
3) Yes, there is a fan inside the iMac, though in my experience, it is rarely on. The G5 iMac tends to start its fan when it is doinjg some hefty work, eg video or motion work. In the time I have had my iMac Core Duo, (a month), I haven't heard the fan once.
4) You will have to buy the mac version of Office as the builld of the programs are totally diferent.
Just a side note, why are you planning to go for the iMac G5? If I make an educated guess, I would say that you are going to use the iMac for web, email, itunes, office, imovie etc, and if this is the case, the iMac Core Duo will be a hell of a lot faster, for the same price as the G5. The only slight reason to maybe consider an iMac G5 is if you use programs such as Final Cut Pro or Adobe Photoshop that will not run on the iMac Core Duo YET (though note photoshop WILL run, under what is known as Rosetta, and I have found performance to be adequate - note performance of such programs wil increase as 'Universal Binaries' are released)
Hope all this helps :d