I've replaced the hard drive on two G3 imacs, it's pretty easy, here is some info I can give you.
http://www.sterpin.net/uk/imacslotinukp.htm
http://www.macworld.com/2001/10/bc/howtoimac
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.
Good luck and ask me any questions you may have.
Oh and DO NOT use a magnetized screw driver as tempting as it may be to prevent yourself from dropping the screws. I don't know if it'll really mess anything up, but magnets and computers don't mix.
