welcome to Mac!
First of all Noah, stick with either a PCI solution, or a FireWire based solution.
To answer your questions:
1: The low end G4 right now is cheep. However, you didn't specify which applications you'll be wanting to run, Logic, ProTools, Nuendo, Cubase (sp), or Digital performer. Your best bet right now would be to look for a good used machine that has a dual processor. PowerMax.com, Shreve Systems are a couple of places to start. I'd avoid the eBay stuff myself.
2: Yes, sort of. The G4 processor takes advantage of an AltiVec Engine which allows twice the data througput but only if the application (PhotoShop) is written to take advantage of this. Most audio applications should take advantage of this, but I MOTU's DP is the only one I'm certain does. Additionally, it's really difficult to compare a 1GHz Mac to a 2GHz Intel or AMD chipset. There are so many other factors. For example: Mac's don't have what you would call a "Boot ROM" to trick the CPU into using a piece of hardware that might not be 100% compliant. Macs are built with much higher hardware tolerances than PC's and that's why they are more dependable, and more expensive.
Mark of the Unicorn released a press release a year or so ago, can't find it at the moment, that said a dual 800 G4 would handle over 100 channels with plug-ins. I have a 4 year old G4-400MHz and I can easily handle 32-40 tracks with Digital Performer.
3: No, the Dual 500 should do you just fine, espcially since you don't seem 100% sure of the switch.
Your questions aren't naieve at all.
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