The performance of the Mac mini in its standard form is unacceptable, even for a $499 machine. At first, I was afraid that the poor performance was due to the 1.25GHz G4. However, upon further investigation, the root of the cause revealed itself - 256MB of memory is simply not enough for OS X. When running one application, such as Safari or Mail, the 256MB of memory is enough, but as soon as you open more than one application, the memory quickly disappears. The problem with disk swapping on the mini is that it is using a 2.5" hard drive, which is significantly slower than a desktop hard drive. So, overall performance is reduced significantly. There's a ton of stuttering when multitasking (not even heavy multitasking) and it's completely caused by disk swapping.
Upgrading the system to 512MB of memory fixes all of the problems. You'd be hard pressed to get close to 100% CPU utilization on even the low end 1.25GHz G4 without resorting to video encoding, and most importantly, the system is as smooth as can be with 512MB. As I mentioned in the first Mac article, OS X's caching algorithms work wonders for perceived system performance, since there's very little disk swapping, but in order for the OS to do its thing, you need a certain minimum level of memory and that seems to be 512MB. Apple offers a 512MB upgrade for the mini for $70, which is slightly cheaper than what a DDR333/400 stick would cost you aftermarket, and it is an absolute must-have for this system. Working on a simple file, ftp or web server with no end user interaction in the OS, you can get by with a 256MB configuration, and the same goes for a single user, single application usage environment, but as soon as there's any element of multitasking at play, you need 512MB - any less doesn't do the system justice.
Honestly, the first time that I used the mini, I was quite frustrated with it, simply because there was just too much disk swapping going on. But after the 512MB upgrade, I was more than happy from a performance perspective. The 5400RPM drive in the system is actually fairly snappy (when not being swapped to) and application start times are pretty reasonable as well. There's a clear difference between the mini and Apple's PowerMac G5s, but despite the difference, the mini offers a pretty good level of performance, if it is configured with 512MB of memory.
Apple should not be allowed to sell any system with OS X with less than 512MB of memory; and you shouldn't buy the mini with less than 512MB of memory. It's as simple as that.
The performance of the 1.25GHz G4 is surprisingly good.