OK thanks everybody. I went to the Apple store and bought the Mac Box Set 
MC581Z/A which cost me ~$152 with a corporate discount and tax.

This states that it's an upgrade for leopard or tiger, and includes ilife and 
iWork.

I think its worth it because Apple recently replaced this iMacs screen for free 
(it developed vertical lines). I'm thinking that if I replace the hard drive, 
my wife should get another five or so years out of it (she's not a "power" user 
and she likes it's looks :).

What kind of hard drive is needed? Any idea how big it can be? The current one 
(original) is 140Gb. This is a 17" 1.83GHz Core Duo iMac from 20006, I upgraded 
the ram to 2Gb.

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