Am I right in thinking I would only see the full benefit of OS 3.9 in all its high colour and fancy backgrounds on a LCD? I guess a 14 inch CRT wouldnt be able to offer that?
If you haven't gathered already from this thread, this is pretty much up to individual user's opinions. Some people swear by original CRT monitors. Some people want the newest & best. Properly configured, 3.9 can look good on both.
You're kind of putting the cart ahead of the horse with this question. You'll need a graphics card (or at least an Indivision), if you really want to take advantage of some of the higher resolution/color modes. At that point what monitor you select will be down to your choice of "what works best with my graphics card?". You're not going to use a 1084 monitor with a Picasso IV, for example.

Is there much differnce between 3.5 and 3.9 OS?
Don't waste your time with 3.5.

I manily use my A1200 for games but I want to update the OS with a more refreshing look to it.
IMHO 3.9 with
Ken's Icons v4 looks very refreshing over older versions. Even standard
3.9 GlowIcons look pretty nice (IMHO). Search Aminet for all of the various icon packs on there (you can spend hours doing this), and don't forget the
Peter K. icon library.