i have a 2009 mini, 2 ghz machine, mine came with 320gig internal drive.
it works fine for everything, except gaming. i keep trying to persuade myself to buy a new machine but realistically i'd be better buying a ps3. outside of gaming i dont think i would notice much of a difference between this and a new machine. however it does some gaming, with bootcamp i played stuff like fallout 3 and fallout new vegas perfectly fine, and in os x i played a lot of civ 4, civ 5 was jerky in os x but better in windows.
i use it for internet, football manager, basic indesign/photoshop, plex, itunes and whatnot.
only 2 things id say. firstly, the hard drive space wont bother you unless you use bootcamp, if so, 160gb is going to be a pain.
secondly, bump the ram up to 8gb. i noticed a difference when i did, and then after a year i was getting errors which i traced back to a failed memory chip, having taken it out i can notice the difference when im doing a lot of things.
im happily running 10.8 on it.