I agree with Waragainstsleep. The upgrade to twice the MB of VRAM is significant, but the real improvement will be the large 20in screen. If you can afford it, it is worth the extra money.
In response to your other question, I suggest that you buy the iMac now, and upgrade to Leopard after it has been out a few months. OS X Tiger (the current system) is fun, stable, and mature right now since it has been out over 2 years and has had a long time to be refined.
Although Leopard shows improvements (and looks even more fun), it will be brand new in October. New OSes usually take a few months to work out the bugs, so you're better off sticking with Tiger until that happens.
Another thing to keep in mind is that (according to rumor) the iMac might get an update sometime soon, so keep an eye out for that.