As usual, I'll have to see one in person before making a final judgment. But from what I can tell, it looks to me like an excellent machine.
I have to say, I'm getting better at prognosticating.

I called the general design, and the advantage (which a lot of people are overlooking, but it's right there on the iMac's page) that you can pop off the back and there are all the components laid out right there for you. I'm not sure why someone upthread complained about upgrading the drives, because (again, from what little information is out there now) it looks like that's
easier than it would be in the average minitower. 256MB RAM is not great, but the claims that it's
unusable are wildly overstated.
As for the graphics, OK, so they did use the GeForce FX 5200 Ultra. It still has more complete support for programmable textures than the ATI 9600 (future proofing for Tiger, natch, and also for games like DOOM 3 that explore the dusty, unused corners of most GPUs). It's still a decent GPU for a machine in its price range, as several posters have demonstrated. The GPU might yet be upgradable, if not user-upgradable. It depends on whether the iMac uses the GPU daughtercard developed for the big PowerBooks. If so, the few and the brave could attempt it themselves, and some others could ship their iMacs off and have, say, MCE attempt it for them.

Furthermore, the FX 5200 appears not to have been much of a bottleneck in the older iMac. Apple is claiming "three times the frame rate as the previous iMac in Unreal Tournament 2004," which, if it's even half true, means that the upgrade to the G5 and its associated architecture should make a big difference in games.
The price at the low end is OK. The prices at the mid and high end are better than I expected. They did, in fact, shave hundreds of dollars off the price of a computer with a 17" LCD.

And they finally have all preconfigured iMac prices comfortably below $2000 as is Right and Proper. They didn't get it down to $999, but then they might have better luck scaling this design down.
VESA mounting, combined with the built-in computer and power supply, is a bonus that will not be lost on enterprise. Talk about saving desk space. The optical drive-less edu iMac is also going to be an excellent enterprise — well, I suppose it's still a desktop — at a very good price, with peerless ergonomics. Remember, when you consider the enterprise market and large edu institution purchases, they're buying in lots of thousands or tens of thousands, and they aren't paying anything near retail. The profit for the seller is in the multi-year support contracts.
Looks-wise, I think they did a great job. It does conjure the iPod in more ways than one. It's the perfect hub for your Digital Spoke!

It's clean, friendly, it doesn't have the awkward proportion between the screen and the body that the 15" iMac did, and (with the wireless kb and mouse) it only has one cord. As my boss said of that last feature, it's about damn time.
I think this will do very, very well. I might think that because this is the computer that I really wanted when I bought my Cube, but I really believe this will take off. The 20" iMac is calling my name.