I have my MacBook Pro configured as a desktop during the day. I enjoy my current setup a lot since I can easily disconnect all of my cables in a minute and move the Mac over into another room.
Here are some of my pros and cons.
can connect to external monitors,
wired to router via Ethernet,
connections to USB hubs,
access to wired Time Machine backups...
My Santa Rosa MacBook Pro (2.4Ghz C2D, 4BG of RAM) packs plenty of power to run normally in a desktop configuration.
My HDTV shows from iTunes look great on my external display.
I can have access to all of my devices while at my desk.
Two usable screens (built-in 15-inch display + external)
Battery runs down quicker with multiple things plugged in,
Disconnecting some cables, such as DVI connectors, can take a minute, preventing you from just picking it up and moving...
With a MacBook Pro, this setup works very well. Just plug it all in and it works. And when you make it all wireless, it still works, in theory like you say. Also, with a regular MacBook, you would have less power at your disposal and a smaller built-in display to work with. I use both of my monitors simultaneously so I can make use of large windows, but the regular MacBook is quite small. For me, it would be hard to use a 24-inch monitor and a 13-inch one together. I keep all of my media files on the internal HD while I backup large video files to my externals. No problems with iTunes here. Eventually I plan to migrate the files over, but right now, the music library on this Mac isn't too big yet.
The only problem I see here is that for the same price of this MacBook and display, you could easily get the most powerful iMac. It runs over 1Ghz faster, is an all-in-one like your G5, packs a great NVIDIA GPU, and more storage. The only "bad" thing is it's not portable.
Overall, the iMacs look like they have the better value. Also consider that the iMacs are due to be updated in the next few weeks/months, maybe at MacWorld if they don't come sooner. The choice is a matter of personal preference; for me, I like being mobile, but I wouldn't mind having a 24-inch iMac at home to remote control through Back To My Mac or something else. Having a mobile setup is great, but it does limit your performance and power options. But if that doesn't concern you, then go right ahead with it. Good luck.
I'm considering replacing my 20" iMac G5. Since the 24" iMacs start at 2K I am wondering if the 1300 dollar Macbook plus the 900 dollar 24" Cinema Display would work as a good substitute. Processing power will be more than adequate.
The main thing that concerns me is how well a laptop will work when inserted into my home setup. My iMac currently acts as a media hub in our household with multiple users using multiple user accounts streaming music around the house off an external USB drive. Everything is automatically backed up to firewire drive using Time Machine (its USB as well if I have to give up firewire with the new Macs). The iMac also syncs with the Apple TV wirelessly.
I know a Mac is a Mac is a Mac and all that these things should continue to work seamlessly... in theory at least. But unlike a Macbook, the iMac never physically moves and never is disconnected from its wired connections. Synching, backups etc all just happen. So does using a laptop as your primary machine throw a wrench into that system? I know if you open iTunes without the external hard drive your library gets auto relocated to its default position on your internal hard drive which means you have to go move it back each time you reconnect to the external drive.
I could envision all sorts of weird problems that might happen as a result of running the laptop both connected to and disconnected from a given network where things happen automatically. The last thing I want to deal with is corrupted Time Machine backups or auto-syncs that wipe my Apple TV clean because the iTunes library had been accidentally moved.
Does anybody run a system like this and if so what are the potential