Read this page about the limit of the size of the hard drive that you can put in the imac. http://www.lowendmac.com/imacs/slot-up.html
I put in a 120 gig 7200 RPM one in my summer 2000 indigo imac. I never had any problem with overheating, but your experience may differ depending on what you plan on using the imac for.
But I highly doubt it will over heat if you keep it in a well ventilated spot. I.E. Not in a cramped little desk with a shelf right above it that's going to preventing the heat from getting far enough away from the imac.
I've been wanting to wire up a pc cooling fan to run on batteries, or possibly even work off the power of a USB port to mount on top of vent of the imac to really help it cool off.
I'll try to get some pictures up of when I did this on my imac. I also did it on one of those seafoam green colored imacs, they were the first slot loading ones. Both times I had no trouble.
It's actually very easy. Just be careful not to drop any screws into the imac. I also took each set of screws and stuck them through a piece of paper and wrote which part of the imac they went to, using separate pieces of paper for each set of screws.