You're comparing the previous gen 1.5 to the current 1.67. Yea the 4200 is pretty slow, but for the $700 difference, you can have an Apple authorized center put in a 5400 RPM drive (maybe), preserve the warranty and still save quite a bit. Of course if you have to have the 1.67, Bluetooth EDR, SMS and native scroll trackpad then the 1.67 is your only choice. I thought all the previous gen 17s came with the 5400 rpm drives.
4200 will sour your experience (I've had 12"s PBs with both and a 15 currently with a 5400 rpm). However, $700 is a big difference.
If you don't mind me asking, where are you getting this deal on the old 1.5? If it's not from an Apple authorized reseller, it might not be worth it to save a few bucks. Almost any repair on the Powerbook is very expensive.