1. will having FileVault on slow my mac down? i have a powerPc mac and can't really afford that.
Yes, but probably not very noticeably. I guess it depends on how you use your machine though. Constant access to and from the hard drive will be slower so video and graphic work will be much slower, whereas basic internet browsing probably won't be any different.
2. will it need any extra space on my hard drive? can't really afford that either.
Yeah. It will consume at least the amount of space a default Home account takes up, although this isn't really all that big in the scheme of things (I guess).
3. if i'm logged in and using my files, does FileVault prevent someone "hacking" my computer accessing my files or is it just in case someone tries to access my files when i'm logged out?
thanks
I guess it would prevent hackers to an extent, but it's not really what File Vault was intended for. Depending on how the machine is hacked, it's less likely they'll be able to see your files. Keep your OSX firewall on and it's nearly impossible to hack a Mac anyway.
In short, don't turn on File Vault. It's still a very buggy piece of software and by its very nature, this means you can end up with all sorts of problems (mainly data loss/inaccess). In addition, it's more difficult to back up a protected folder. It pretty much has to be done manually because backup apps don't play nicely with the protected folder. It's more designed for the sort of person who needs the security of being able to lose a laptop and be safe in the knowledge that without the right password, the files will be inaccessible.
If there's something in particular you want kept secure like this, I recommend creating a protected disk image in Disk Utility (which uses the same encryption) so the rest of your machine isn't hampered by the constant encryption and deciphering that File Vault demands.