Since no decent browser exists for AmigaOS or any of his clones you are out of luck. If you can live with the current browsers and you wan to run ppc software a pegasosII is very nice. KHTML should be ported to MorphOS in the next months.
To run old amiga games you alredy have your old A1200. You don't need anything more than that to run old games.
I would continue using your A1200 for games and the PegasosII to run ppc/modern stuff.
OS4 is nice, but it's uncertain when new hardware will appear so it depends on how patient you are. If you need something NOW, a pegasosII is a cool home computer.
Don't waste your money expanding your 1200. Even with a PowerVixeen you wouldn't be able to play 90% of aga games/demos...
If you can find a 2nd hand full machine very cheap go for it, but at the moment your 1200+pegasos is very nice.
AROS doesn't have software to burn cds, to browse the web (sorry, Mosaic is an old joke), to watch movies, or to listen music comfortably.
BTW NEVER buy a BlizzardPPC without SCSI!
