Actually thats not even close to being true.
The CPU upgrade is way more use full than the graphics card in everyday computing.
Here is the differences between the imacs with the same processor and different video cards. The only major difference worth noting is in games. Thats the only major difference.
http://www.macworld.com/article/143636/2009/11/imacs_late2009_benchmarks.html
Now let's take a look at the different processors.
http://www.winandmac.com/news/best-benchmark-imac-core-i7/
The difference between the 3.06 and the 3.33 is about 9% percent in performance.
That may not seem like a lot, but it makes a difference when you are running intensive applications. Makes a big difference. Lets look at the numbers shall we? This is just a few between the base imac and the ATI imac both with the 3.06 processor.
Adobe
Photoshop---Cinebench-------Parallels------Compressor
0:44----------2:16------------5:26-----------8:09
0:41----------2:15------------5:20-----------8:06
You see the above tests don't have much difference between them, so other than gaming the better graphics card doesn't really do much for every day computing.
Now lets see the numbers with a 9% performance increase, this is a rough estimate but you get the point.
Adobe
Photoshop--Cinebench--------Parallels-------Compressor
0:41----------2.03------------4.97----------7:41
0:41----------2:15------------5:20----------8:06
Not much difference in shorter less intensive applications. But there is a nice increase in the more demanding ones. These are not exact numbers, but that is roughly 9% as the above geekbench scores indicate.
I have owned the base imac 21.5, upgraded to the 21.5 with the ATI card, had issues and handed that in on a 21.5 base with the 3.33 processor. Of the three, I can tell a difference in speed with the upgraded processor, but not with the ATI imac. I have witnessed this first hand. No more heat from the 3.33, but there was more heat from the ATI card and HD.