I have a "headless" PowerPC-based Mac mini (1.5GHz G4 model with 1GB DRAM) running as my iTunes server for a 1st generation Apple TV and it works very well. I can even stream concurrently to both my iPad (using Web Sharing) and the Apple TV and the Mac mini still has lots of bandwidth remaining (CPU utilization runs at only a few percent while streaming content to the Apple TV). It's a bit ironic that you can stream HD content FROM the Mac mini that can't even be played successfully on the Mac mini itself (the G4-based Mac mini can't handle 720p playback -- too many dropped frames, stuttering, etc. -- however, streaming 720p FROM the mini TO the Apple TV works fine).
You should note the following issues:
1. The PowerPC-based Macs can't be awaken by the Apple TV, so if the Mac mini goes to sleep it will stay asleep and any subsequent access from the Apple TV will fail. However, there are iOS utilities that can be used to awaken a sleeping Mac so I can use my iPad to both control the Apple TV and awaken my Mac mini (or just leave the Mac mini running in full-power-up mode -- I think my unit runs at just over 20 watts when idle, and that costs about $0.05 per day for electricity). I believe that my entire Apple TV/iTunes system (Mac mini + 1.5TB external drive for content storage, and my Apple TV) runs at about 50 watts so it costs about $0.10 per day to keep everything running (your costs could be higher or even a little less depending upon your electricity rates).
2.) The PowerPC-based Macs aren't supported by Snow Leopard (Mac OS X 10.6.X). Thus, I'm running 10.5.X and the latest version of iTunes. Problem is, I don't know how much longer Apple will fully support iTunes under the PowerPC and Mac OS 10.5 Leopard. Right now iTunes 10.1 (the latest version) lists the following requirements:
Mac computer with an Intel, PowerPC G5 or G4 processor
Mac OS X version 10.5 or later
QuickTime 7.6 or later
So, I'd say that my Mac mini is just barely making the grade (right now). In another year (or certainly within two years) that could change and it might become a major issue it you are planning on using a 2nd-generation Apple TV. In any case, my 1.5GHz G4-based Mac mini is the fastest PowerPC Mac mini that was ever produced (it was a "stealth" upgrade which I don't think was ever officially announced by Apple -- slightly faster processor and twice the amount of VRAM for the GPU). In fact, you should note that Apple never made a G5-based Mac mini or MacBook Pro -- they are all G4s (at best).
Other than these two issues, a PowerPC Mac mini can make for a very satisfactory iTunes server. Since my Mac mini is "headless" I use Apple's built-in screen sharing to make changes and to control the mini itself. You can either use another Mac or an iOS device for the screen sharing (controlling) client. The Mac mini's DVI output can be used for output to an HDTV, if so desired. But don't expect to use any G4-based system as a direct HD video playback device -- as I noted earlier, direct HD playback on a G4 doesn't work too well -- but streaming HD content to an Apple TV works just fine.
