I'm posting this from a dual usb 500 mhz G3 with 384 megs of ram and I've got to say, it's kind of painful. I'm running Panther, and it's just... slow. I definitely wouldn't want to run Camino + iTunes + Word. As it is, I don't even run Camino and iTunes. I'd say 800 mhz and 512 ram is where your computer starts to be usable. And, honestly, it's not that much more expensive.
Good luck. Better your sister have good experiences with macs, if she doesn't... well you don't want to be taking care of her new dell. 😉