Is this an iMac G5 or a PMG5?
They all support more than 512MB... In the iMac's case, the first two generations have two memory slots for PC3200, and each slot can hold up to 1GB, for a total of 2GB.
The third generation (with an iSight), according to Apple History, has 512MB onboard and one slot for PC4200 memory. That slot can hold up to 2GB, for a total of 2.5GB.
I would recommend going to 2GB (or 2.5 in the iMac G5 iSight case).
http://DealRAM.com can give you prices on the correct modules.... (EDIT: Oh, sorry, I thought dealram provided European pricing and suppliers, but maybe it doesn't).