The size doesn't bother you at all?
I really think it's a matter of personal taste. I bought the 12" thinking that I'd be carrying it around a lot at college, but now that I am in college, it really just sits on my desk most of the time, and I wouldn't mind paying for a bigger screen. The 12" screen is small, but incredibly clear; you have to check it out if you haven't already.
Do you think that a G3 will be able to handle the next OS or future programs?
Depends on how far you're looking into the future, and what programs you use. If you intend on keeping it for several years, I really think you need a G4 to keep up to date, since future upgrades to OS X will not be optimized for the G3 anymore. Note that I said optimized; OS X support for the G3 will stay around for a while, but as some applications get more graphics intensive, a G4 will be needed. A couple of games already require a G4 (Soldier of Fortune II, NASCAR 2002). The G3 is a 6 year old processor, but it is good enough for basic use, ie Internet and word processing. If you plan on heavy video/graphics/gaming use, definitely don't buy anything with a G3.
Would you rather have a emac right now?
Definitely not! Once you go LCD, you can't go back! The only downside about LCD's however, is that the quality isn't that good in non-native resolutions. If I had to choose a desktop, I'd go with the top of the line iMac, but I would really rather have the new 15" PowerBook when it comes out.
Hope all this is useful to you!