If you are working in Flash, you really should have the latest version if at all possible. The internet is constantly evolving and to start out the gate years behind is not a good thing. With that said, the playback on the 350 mhz G3 is going to make it difficult to edit your movies for the PC world. Macs generally play Flash a little slower than the PC counterparts and playing the Flash on a slow Mac can be painful. When you are trying to optimize for a PC world this can be a problem. You may make an animation that looks great on your computer but when you view it on a PC it will end up going way too fast. Of course a lot of this will be dependant on what you are doing.
So I guess in a roundabout way, I am suggesting that if you are serious about designing Flash then you should update your computer. If you are doing it for a hobby and for personal use, then you should be fine. Either way, I'd say go with Flash 8 or at the least MX.