...and Leopard to me outperformed Tiger with at least 2gb of memory. Sounds like you are purchasing a really nice system. Hopefully you don't pay no more than $500-$600 for it.
Definitely use Leopard. Ditto about the price. G5's have been around for a while so you should be able to find a decent price. If the price gets steep then you may as well consider a new low end Mac such as Mini or iMac, although they have zero internal expansion capabilities. (=no pci cards! Eeeeek!)
iWork 09 and iLif 09 seem to fine on my machine. CS, Gimp and other FAT apps take a while to load but run fine.
Check out Craigslist and eBay for software. I bought an unopened retail Leopard disk for $40 and still had the 90 days of Apple support even after I told them I bought it second hand! Way to go, Apple! I see all sorts of software deals but be careful of opened boxes.