It will work with the following caveats:
1. Apple will only support running the display in mirrored mode meaning the Dell monitor will run at 1024x768 and show exactly what's on the iBook's screen.
2. To enable it's use as a fully-fledged external display you'll need to download the "Screen Spanning Doctor" hack - make sure you disable "clamshell mode" in the setup for it as iBooks shouldn't be run with the lid closed.
When you run it as an extended desktop you may find it a bit choppy if you're doing some video-intensive stuff like Dashboard and Exposé or running movies on one screen whilst working on the other - nothing major but it could be an issue for you. The 32MB of VRAM in the iBook doesn't give you much playing room for large monitors, especially since when you run an external monitor off an iBook that 32MB is split evenly between the two screens meaning the big external only gets 16MB of buffer space.
It'll work via a VGA connector so you may find the display a little fuzzy but it's not that bad.
