I currently have a 8 months old iMAC G5, 2.1Ghz. with applecare.
If it somehow breaks and its beyond repairs, will it get replaces with a G5 or a intel iMAC?
They are likely to fix it. Even a few days of repairing is more cost effective for them than giving you a new computer. Apple has really worked out the statistics for how to make the most out of their AppleCare service.
My 2+ year-old 3MP camera died a while ago and the warranty repair/replacement service decided that it was more cost effective to actually replaced the CCD imaging device than give me a new camera. That was shocking because that processor itself makes up a great deal of the cost of a new camera.