AmigaOS 4 isn't PPC Linux. It's AmigaOS.

AmigaOS 4 runs most software which doesn't use the chipset, so games you'll need to run UAE for (which is part of AmigaOS 4 now, via RunInUAE) - but anything else runs. You can even run things like PC-Task if you're particularly crazy. Compatibility with AmigaOS 3.1 is very good on AmigaOS 4, and uses a JIT interpreter called "Petunia" which is very fast - much faster than you'd get on a real 68K Amiga.
Classic 68K Amigas are better than the NG Amigas
only for games. Almost anything that uses the OS is better on an X1000, as it runs most OS 3 programs alongside OS 4 programs seamlessly.
Edit: Incidentally, if you have a Catweasel Mk4, you can install 68K Amiga games using WHDLoad exactly as you would under OS 3. Install the game (e.g. Gods or something), then double-click on the "Gods" icon and it'll start up UAE and boot Gods automatically. There's a little bit of setting up of the Catweasel drivers, but not much, and after that's done you can play your 68K games just by running them.
UAE will never be as good as a real 68K Amiga, but it's a pretty good emulation now and is integrated into OS4.