Let me preface my advice by saying I have convinced 5 people to switch to macs and I've got at least 3 more who will be getting a mac as their next computer.
I think your sister may want to consider a PC. It all depends on what she wants to do. I think you need to take into account the school she is going to attend. Are they mac friendly? If not, she'll have problems with little things like wireless printing in the library, or something similar. If they're mac friendly, I'd go mac. Does she have a small music and photo collection or does she have gigs and gigs? If she doesn't have really demanding needs, a pc should be fine. If she's a power user, I would go mac.
I've been using a Thinkpad running XP for law school for the last three years, and the thing has given me no problems b/c I didn't ask it to do too much. I take notes on it, surf the web, and have a small itunes collection for when i'm in the library (using headphones of course). If your sister has similar demands, she'll be able to do well in your price range with a pc. I have nothing but respect for thinkpads, I prefer them physically even to apple's laptop line b/c they really are built like tanks.
Of course, if she's a heavy user, hates windows, and is going to a mac friendly school, rock the mac.
One last thing: While I agree with everyone that a macbook will give you better performance, your sister's computer usage should determine whether that is really necessary. A G4 will serve your sister fine if all she wants to do is keep her photos and music on the computer and surf the web and write papers. If she plans on using photoshop, or making music, or anything more demanding, I'd say the extra money now will save a great deal of frustration later.