I called Apple over the weekend about the clicking noise. I was on the phone for 2 hours trying to get this figured out. It would start clicking almost anytime I was transferring large amounts of data, but the sound seemed like it was coming out the bottom right (when facing) the iMac....and the HD is in the top left.
Eventually I had to take off the back, reset the PMU, start up the iMac (with back off) and try transferring data. I also had to check that all wires were seated properly and that all screws were tight. After doing this I no longer have the clicking noise.
Apple attributed this to the hard drive not getting enough power to transfer data, so the PMU needed reset.
Apple also stated that this is considered a 'Software' issue, so therefore is not covered after 90 days without a full 3 year AppleCare warranty (although I did nothing software related to solve this problem). So I had to pay them $50 for a 2 hour phone conversation and partially taking apart the iMac and resetting the PMU....all hardware. And I only get 5 days for this repair case to be open.....if the clicking begins again after 5 days and I have to call them, I will have to pay another $50.
My wife and I were about to buy a 12" PB, for her, the iWork suite, and 2 iPod Shuffles........looks like I'm going to cancel that thought because I am not very happy with having to pay Apple $50 for something that wasn't working right on my 3 1/2 month old iMac G5