Thanks, it sounds like the speed of that older iMac would benefit from a bootable external SSD. Something to consider. Do you know of any drive enclosures to put a Vertex 3 MAX IOPS or a Samsung 840 in, to breathe new life into the system?
I had good luck with OWC's aluminum 2.5" enclosure, but you should probably get the power supply (sold separately) as well. You'll also want to limit the number of devices on the FW bus if possible - I'd say a max of 2, and they should both be powered. Macs are pretty notorious for power issues on the FireWire bus, especially with bus-powered devices.
You should notice a pretty decent performance improvement compared to the internal drive - it should even boot faster, honestly. That was my experience with my 2009 i7.
How to arrange your data will depend on how large an SSD you get - if it's large enough for everything including user data, just clone everything over and do a nightly or weekly clone back to the internal. If the SSD isn't large enough for your user data, then clone everything except /Users to the SSD. For safety's sake, you should probably go into Users and Groups, right click on your user, select "Advanced Options", and point it specifically at Macintosh HD/Users/YourUsername before doing the clone - this should avoid any issues with the SSD clone not being able to find the /Users folder on boot.