Yep, its not a matter of whether not not it has an AGP slot or ATI graphics, iMacs aren't supported under MorphOS.
On the other hand, Franko's right, its not a bad OSX machine (or Ubuntu for that matter).
See if you can upgrade to at least OSX 10.4 (Nicholas and Franko both have points here, 10.5 is better but you're going to need 10.4 at minimum).