Modding? All you have to do is lift a lever pull the old chip out, and drop the new one in. Make sure you put the lever down.
Done. No modding involved.
The iMacs are a little tough to get open though so if you do it. Take your time. I am sure this voids your warranty too. On a PowerMac/Mac Pro I wouldn't care but on an iMac that makes me a little worrysome.
This is actually something I am pondering. I have a 20", my options are as follows:
1: Upgrade to Merom, sell off Yonah. I can't buy Apple care anymore.
2: Buy Applecare, and not do any upgrades to the iMac.
I am leaning toward 2, but 1 is calling me.