Old iMac + not-so-old MacBook =

If I'm reading your priorities right, I think the best option might be to keep the MacBook and unload the old iMac.  Go to your retailer of choice and buy a big flat panel LCD (we bought a 25-inch screen last year, only about $150--maybe less) and the appropriate video adapter from Apple ($17, blech), and you can have lots of screen real estate on the presumably more functional MacBook.  You should hang onto the keyboard and mouse from the iMac too, though you may find yourself wanting wireless ones down the road.

for the sake of space; could we essentially "hide" the Macbook and just have the new LCD out?  ya?  we liked the iMac because there was relatively low clutter - no tower.  but yes - the only reason to not just upgrade the MacBook with an AirBook; and put the MacBook into general service was that we liked the big screen of the iMac.

thanks for the suggestion - we'll look into it.

(1) No.

(2) Probably, but why do you need to?

Your old iMac has a Power PC processor. Everything on the motherboard is built around that, so there is no upgrading to a newer OS. But, as long as the machine is working OK there is no immediate need to upgrade the OS. You will run into some Java compatibility issues, but otherwise, it should web surf fine.

Adobe has also stopped producing new versions of Flash Player for Power PC processors. You could run into some issues down the road as far as web browsing goes.

There seems to be support for powerpc macs on the ubuntu site.  

https://wiki.ubuntu.com/PowerPCFAQ

As long as you have an external keyboard and mouse, you could run the Macbook in closed clamshell mode.  [This works with wireless keyboard/mouse combos as well, at least the one I have anyway.]

The Big E's suggestion will likely be your best bet if a lack of clutter is your main focus.

Does anyone out there know who works on Macs?

So far browsing has been OK.  Running into problems with Netflix and some flash issues. But for the kids, it's an upgrade. Thanks for the suggestions - I especially like the "closed clamshell mode" idea.  I've got an old iPhone issue, but will post that as a new thread.