In general, more RAM is good.
If you are multitasking, or using graphics programs, or digital video, or if you have more than a couple of hundred pictures in iPhoto, then 2 Gb is the practical minimum.
That's probably the most accurate and concise answer to this question.
Canada--
A comment and a question.
Comment--I didn't know that iPhoto was such a driver of RAM consumption--that's interesting and good to know.
Question--is more RAM ever bad? (Seriously--is there ever a disadvantage?)
Bob
Yes, iPhoto is a RAM hog. On my previous G4 mini w/1gb RAM iPhoto with my library of about 1500 photos was dog slow (part of that was the slow harddrive, but more RAM would have solved that by having to read from the HDD less). However, in my brief look at iLife/iPhoto '08, the events system looks like it might have helped by letting iPhoto load up just the 'key' photo for an event first, and then load up the rest of the photos in that event second, so if feels like it reacts faster. I suspect that the package structure of the iPhoto library keeps more information in a central place, which makes it feel faster too.
Anytime you have to deal with hundreds or thousands of fairly large files you're going to run into RAM and harddrive speed issues. That's why iTunes keeps a separate DB of all your music - if it was trying to read the metadata from each of your thousands of music files it would be sloooooow.
Finally, with the new iMacs coming with a single 1gb DIMM and the low low price of a second 1gb module (I order one for $38 shipped last night, from a reputable manufacturer and a very good reseller) there's almost no reason you shouldn't have at least 2gb RAM in a new iMac.