When i put Tiger on my G3 originally i was a bit hesitant since Panther was working fine but i figured i could always go back to Panther if it didn't work out.
Speedwise Tiger doesn't feel any faster then Panther (not like Jaguar to Panther) but it doesn't feel any slower either.
The only thing that didn't work that great was spotlight which doesn't bother me since i'm not a fan of spotlight anyway, turn off spotlight install EasyFind problem solved. Now Dashboard (aka widgets) worked fine and i like widgets and while widgets don't use much CPU power they love RAM. But since my computer is low on RAM to begin with i decided to disable Dashboard until i can get some more RAM for cheap.
Now there was some bonuses switching to Tiger i now have a RSS reading Safari which i love and there are also a few small programs that i use that only work in tiger. (older versions available for Panther)
My advice for OS X on a G3 is use either Panther or Tiger whatever is easier to get your hands on.
Panther is ready to go out of the box on a G3 but lacks things like RSS Safari and Dashboard and as Panther gets older more programs are Tiger only.
Tiger might take a little tweaking if your G3 is slow, i.e. Spotlight seems a bit slow on some G3's. But Tiger has all the extra features and your will programs run the same speed as on Panther.
either option is good IMHO