For the cost of an upgraded processor from say OWC, you are actually better off picking up a used and faster G4 Mac of eBay or Craigslist. You can get Dual 1ghz G4s for Under $200. Then all you need to do is just swap out your hard drive and add your existing memory to the newer one, if there's open slots available.
For the money, going from 533 to 667, you will not notice anything! Bumping it up to 2gb of memory will give you more noticeable results. Then sell your old G4 for $50 or so and use that money to buy a better graphics card, if the G4 you find only has a stock one.
Try to find at least a dual 1ghz either a Quicksilver or MDD(Mirror Drive Doors) G4. Like I said earlier, you could actually find them cheaper without HDD or memory as you can just swap your own but the MDDs do use DDR memory so that will not swap.
Good luck and Happy Holidays.
*added*
To answer your original question. Yes that will work with taking another faster processor and installing it in your older one.