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Just be sure to bump the RAM. Macs love RAM.

Be aware that Apple charges $100 or $1,100 for their 2 RAM upgrade options while those same upgrades will cost you $68 or $980 at crucial.com.

You should certainly spend the $68 to get the 4 GB of RAM. That's a 'must-have' at that price.

(Also, I'm pleased to see that Apple, while still more expensive, isn't double the price like they used to be. These 2 Apple upgrades are 47% and 12% more than they are on crucial. Still more, yes, but the difference is shrinking.)
 
What about OpenGL ES game development for iPhone?

Can the cheapest iMac handle that?
 
What is the cheapest mac that could be used for app development? Would a 1.5GHz core solo Mac Mini work?

Core2 duo is much better value.

For cheapest ones with warranty, you can find refurb once in awhile in apple store but they often sold out quickly.
Here: store.apple.com/us/browse/home/specialdeals/mac
 
Any Intel Mac is MORE than capable of developing for iPhone on.
Think about it. The computer just have to have specs matching the phone...
 
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