You know, turning it into an arcade machine makes me think... The Nintendo Gamecube and the Nintendo Wii both use a version of the PPC750 (G3) processor. Granted, they're dedicated machines with specitfically tuned GPUs and memory, but I can't believe a G4 with a high-end GPU or even a G5 can't efficiently pump out graphics of the same quality as something like the GameCube. Really makes me wonder how much of the OS X overhead could be lowered... Oh, well. Ultimately I don't care too much because I prefer console gaming over computer gaming.

In any case! The arcade console G4 sounds like a fun idea. Making some kind of small one might be the ticket... It'd really be more like an all-in-one G4, though, if it was small enough to just sit on a desk/counter/table.
DP 1.08GHz PMG4 MDD, 1GB PC2700 DDR, 200GB ATA (16MB, 7200RPM), Radeon 9800 Pro (256MB)