Well, IIRC, the G4 iMacs topped out at 1.25 Ghz speed. Apples web site says that to edit HD content in iMovie (which I take it you are using, or is it FCP?), you need a min of a 1 Ghz G4 - so you are pretty close to the bare min with that system you have there. It should work, but will be slow.
In regards to RAM, again, IIRC, the max on your system is 1.25 GB, so I'd max it out - this should help out.
It depends how serious you are about editing, but if your doing HD, and splashed out on a HD camcorder, I imagine you are semi serious, and for this reason I would suggest, if you can afford it, getting a new Mac. Maybe an iMac Core Duo, which will be a big boost up from what you already use. If you are using FCP, then universal upgrades will be available in about a month, so I think the iMac would be perfect.