Well, OS 10.1 will be done by Mac World if Apple keeps on schedule. 10.0.4 will be released before then as a pure bug fix and speed improvement. 10.1 has DVD playback and major updates to Java. Java, interestingly, is what is holding back the current 10.0.4 update according to some sites. Perhaps they are addressing the Java bugs that keep things like Hushmail.com and a few other sites from functioning properly.
I don't want to be discouraging, but buying an iMac with an external DVD drive that costs $800 would maybe not be so practical. DV editing (I have done a lot of it, my last project editing 80 minutes down to 12 minutes with effects, transitions and background music etc) requires a lot of processor power. If you don't have a G4, you will spend a lot of time waiting for processing to finish.. On an iMac DV SE, to dump 12 minutes of DV to quicktime took an average of 50 minutes to accomplish. Some codec settings took hours. The G4 with built-in DVD burner is really the only way to go if you are serious, not just because the G4 is needed to cut rendering times down in a big way, but because it's more expandable, and you will not likely see support from Apple for 3rd party DVD burners in their iDVD free software any time soon if ever.. Just a few things to think about.

If you can find the money for the 733 with the Super Drive and it doesn't require refinancing your house, then it would be more practical.. I would seriously check that the external drive you are looking to purchase allows burning of DVD-video disks.. Some may only allow burning DVDs in data mode, and some may have very cheesy, BAD software for recording video in a video-DVD player compatible format that may make you want to pull your hair out.
OK, so the 744 Power Mac is probably out of most peoples' reach price wise. That means you have to get an external DVD drive (compatible with Mac and with software that does what you want to do --if any such beast exists).. You should still try to get a minimal G4 system at 500Mhz or faster. You will be happy with the speed of that. The G3 at even 600 Mhz won't be as snappy for DV as a 500Mhz G4 simply because it doesn't have the Altivec engine which boosts these kinds of computationally heavy graphics processing jobs anywhere from 25% to 300% depending on operations. Can you use a G3 to do DV editing? Yes, I've used as slow as a 400 Mhz to do it, but it isn't exactly fun when it comes to the effects processing and conversion stuff which can crawl the computer for hours at a time depending on what you are doing.
If DVD is really just to expensive for now or the only cheap DVD drive setups are inadequate, then fear not. If archiving your home videos is your primary reason for DV, then I suggest this cheaper alternative:
iMac 600 Mhz with CDRW.
Sony Analog to DV converter (or equivalent)
Toast 5 Titanium software.
You can archive them quite successfully in great quality on CDs using Quicktime video and the Sorenson codec as your output option from iMovie. If you have to play them on a DVD player and can't stand only viewing them on a computer, then you can save them using Toast 5 from Roxio to record a CD in CDV format (CD Video) (I believe this is mpg 1 video and audio) which does play both on most computers and most consumer video DVD players.
Hope that helps ya out.
Xistor
http://www.mxormedia.com/OSX/OSX.htm (my OSX bug site)