I just made the switch 2 months ago. You will be very happy with the iMac and the iLife applications. The iMac handles video editing very well and the iLife apps are very good consumer-level apps.
I was doing video editing on my Windows XP box with 800mhz AMD Athlon using Pinnacle Studio software. There are hundreds of frustrated users of Studio--people who can't even get the app to run, but I was one of the lucky ones. I was able to edit and burn to DVD with good results. Studio 8 compares well to iMovie and Studio beats iMovie in some aspects (included royalty-free music and awesome titling). But Studio is a $99 package. iMovie is free.
I was tired of waiting 8 hours to render 50 minutes to DVD. So it was time to upgrade and I wanted a Mac...I picked up the previous generation iMac 17--1Ghz refurb from Apple's special deals page. It takes about 3.5 hours to render and burn a DVD on my 1ghz iMac. This is a nice improvement over my 800mhz PC. I have made 2 complete movies with nice titles, background music and slideshows from iPhoto. It was bascially impossible to create a slideshow of still images on my old PC. I'm still learning the in's and out's of iDVD but it is very easy to use out of the box with the default templates.
You may eventually outgrow iMovie. But if you do, having a Mac puts you in the place to be because you can jump to Final Cut Express or even Final Cut Pro. iMovie is fairly stable, but if you start getting advanced it may slow down a bit.
I created a 7 minute Halloween movie of my kids with titles, special effects like fog and "aged film" and some background music. Then I wanted to create a 30 second "trailer" for the movie. It probably took me 3 hours to edit the trailer to what I wanted it to be! I was separating audio tracks from the video, adding MP3 soundtracks, titles, special effects, etc. iMovie was able to handle it all.
I haven't had any crashes at all (knock on wood) and everything just plain works.
I don't think a home movie maker will outgrow iDVD. It is pretty full-featured and the templates are awesome. iMovie's chapter markers feed right into iDVD--very nice.
Tips:
1. Get an external HD to store all your video and your iMovie and iDVD projects. Get at least an 80gb drive, 7200rpm. Throw that in a Firewire enclosure and you will be set to go. Do not store your video on your standard hard drive. I picked up a Firewire enclosure on eBay for $50 and it has been great. Make sure the enclosure has the Oxford 911 chipset. If you get the new 1.25ghz iMac you'll have USB 2.0 so maybe go that route...
2. Save your projects early and often.
3. Do not run other apps while editing. You may be able to get by with a browser and/or email client but don't push it.
4. DO NOT RUN OTHER APPS WHILE RENDERING. Let iDVD do it's thing. Don't come back during render and try to open other apps.
5. Don't burn your DVD until iDVD is completely done rendering. You can see this in the last tab (Status?) on the customize panel (I'm on a PC right now so I don't remember exactly where it is). Let it do the background render, then click burn.
6. When shooting video on a MiniDV camera set your audio to 16-bit. 12-bit sound recording may cause your audio and video to be out of sync in iMovie.
Have fun and good luck. The iMac is a great machine for video editing. Definelty get the 17", it helps alot with editing.
