I just got a mid-range iMac (2.4Ghz/1GB RAM/2600 Pro 256MB) and it plays WoW beautifully. There are 2 options which greatly reduce the framerate - Full Screen Glow, and turning multisampling above 1x. The glow effect is very subtle and cuts framerates in half or more. Multisampling is not quite as big a framerate hit, and while it does smooth jagged edges a little bit, the iMac screen has pretty high pixel density and the jaggies are not that noticeable most of the time. I don't think it's worth enabling multisampling on the iMac.
Otherwise, all options are maxed out, playing at 1680x1050, and it's usually 50+ frames per second, occasionally dropping to 30 or so in busy areas. The colors and detail are fantastic, and it looks much better than on my old PC with a 7600GT and generic 19" widescreen LCD. The stock 1GB of RAM is plenty for most areas, but it will stutter a bit in the major cities, and I do plan to upgrade to 2GB.
I would definitely spend the extra money for the mid-range iMac though, the base model with the 128MB 2400XT will not allow you to crank all the settings to high and still get really smooth framerates.
This iMac is easily the best computer I've ever had, and I'm really happy with how WoW plays on it.