I just had to throw my own insight into this.
Power:
The PowerPC 970FX in the G5 Xserve uses 24.5W per processor compared to 51W for the original 970 used in the PowerMac G5. So we have a 26.5W saving per processor or 53W savings per machine. This is just for the processor so we can probably assume there is more of a power savings due to the lack of an optical drive and the lack of a beefy ATI Radeon card. So assuming they will still have 1100 machines that's a minimum savings of 58,300W or 58 kW. The cheapest power available in Virginia is from Dominion Virginia Power (
http://www.state.va.us/scc/news/p2comp.htm) and for a large commercial customer it is 3.624 cents per kwh (kilowatt hour or 1 hour of 1000-watts). This comes out to $2.11 per hour saved. Assuming it runs 24/7 365 days a year (it won't exactly, but this is just an estimate) they will save $18,508 per year or the cost of 5 Xserve cluster nodes with 2-gigs of RAM (standard educational pricing and it's been said that VT got a deal on the RAM which added almost $1,000 per machine in my equation).
Cost:
A PowerMac G5 similar to what Virginia Tech bought is $3,644 while a cluster node G5 Xserve would be $3,444. Virginia Tech could care less if those PowerMacs had a SuperDrive, 56k modem, optical audio, and a Radeon. They can turn these G5 workstations around and sell them for a fairly high price. I'd bet that most likely Apple is trading the machines and doing the refurbishing themselves since they can easily move 1100 refurbished machines via the Apple Store online.
Maybe we want a faster cluster
It's been said that the original layout design allowed for the racks to be reconfigured assuming that Apple was going to release a 2U Xserve G5. All wiring is setup for this. I haven't heard that anywhere reliable, but it has been said. Assuming that VT can install the Xserves and have quite a bit of room left over. Perhaps with this room they can add addition machines. It wouldn't make sense to aim for the number 1 machine spot, but number 2 is quite possible. VT is currently pushing 17600 gigaflops or 16 gigaflops per machine. The number 2 spot is at 20480 gigaflops. 180 additional machines at VT would provide the additional speed necessary to match the number 2 (theoretically which doesn't really equal true speed as they don't scale perfectly).
Just a few thoughts.