The HD 2600 is certainly not a gaming card. As a matter of fact the iMac is not really a gaming machine. Though you would be a bit better off with the 2.4 or 2.8GHz and the 256MB HD 2600 card.
New drivers are expected to be included in the 10.5.2 update due out anytime. The new drivers will certainly help.
I have the 20" 2.4GHz and am quite pleased. but then I upgraded from a 7 year old computer so pretty much anything would knock my socks off.
I would also visit a Mac gaming site to see some real world responses. I run x-plane which is a demanding flying sim and can get good frame rates with very high resolution settings. Flying over NYC is does tend to bring the iMac to its knees though.