For file serving, keep in mind that the PMac G3 has only 10/100 Ethernet and doesn't support drives larger than 120GB on the built-in controller. I have a 400MHz G4 Sawtooth, which should be nearly identical in CPU performance to a 400Mhz G3 for file serving, and I added a Firmtek PCI SATA controller, a 320GB SATA drive, and an Intel GigE card. It can sustain 35MB/s to a Core 2 Duo iMac, and the CPU is maxed out at that point. I don't believe the G3 can be upgraded to dual processor, although there are fast single-processor upgrades available.
Other than all of that, it's a great machine for a server. It has 64-bit PCI slots and you can fit 6 HDs in it if you take out the optical & zip drives, and the power consumption is very low for a tower computer.