If you are going to be running professional/design applications, then you probably want to get the tower. You get more then just some extra speed with the tower, you also get an extra memory slot (PC133 standard chip, not the ones for laptops and such). Plus there are the extra drive bays (can install up to four half-height drives inside the box).
There are also other considerations, like future upgrades to consider. If you know you will be happy with the 700MHz iMac, then by all means go for it. If you are considering getting something faster, then I would go with the tower. With the tower you have more upgrade options. You can change the video card, increase memory amounts, add or change hard drives, as well as adding Zip or Jaz drives inside the box. Then there is the ever so popular (is that the right word
) processor upgrade. I did all but the processor upgrade to my current G4 tower, and have been happy with it. I am selling it so that I am ready for when the next generation comes out, or they release something at MWNY that I can't live without.
You WILL spend more $$ on the tower, there are no two ways about it, BUT you will probably have a system that you will be more then happy with for a longer time frame. Now, before people start slamming me for saying this, there are many people with the rev a iMac that have upgraded different parts and are still very happy with it. The difference is that the current version of the iMac doesn't give you as many options.
At this point, I intend to get a new Mac every three years. That is one tower and one laptop (they will be anywhere from one to two years apart since I still have two years left on my current TiBook and will be getting a new tower sometime this year or before the end of January next year.