a) A PowerPC processor gets considerably more bang for every cycle than an Intel or Intel-compatible chip, somewhere between 1.5 times as much as twice as much. (Despite that, the Intel architecture did get so far ahead in megahertz/gigahertz that PCs were faster than Macs. With the G5, the Mac is no longer eating PC dust even if it’s not necessarily the very fastest computer etc). So an 867 is somewhere between a 1.2 GHz and a 1.8 GHz PC-equivalent in performance, not cutting edge but faster than it sounds like to your PC-attuned ears.
b) I’ll ditto what others have said about G4 versus G3. MacOS X makes use of the AltiVec instructions; a G3 processor can grunt along and cope with the instructions but it doesn’t have a dedicated hardware module on the chip to crank through them quickly like the G4, so a G3 of the same processor speed feels downright poky under OS X. (With PowerPC operating systems, including MacOS 9, it may make less of a difference, but you’ll probably be using OS X most of the time).
c) An 867 with a gig of RAM to play with will perform pretty nicely, really, on graphics and sound file editing programs. Not to say you would not notice or appreciate the extra oomph of a faster CPU, but I think you’ll be happy with it.
d) Buy yourself a copy of MacWorld and a copy of MacAddict; turn to the back pages and you’ll find a sequence of small ads from companies, most of them listing 800 numbers or web sites. Window-shop and take down names and prices and comparison-shop for the best prices. If you want to be a bit cautious, post an inquiry hither and yon (Ars Technica Macintosh forums, MaCOSXHints Forums, etc) about the specific company you end up thinking of dealing with to see if anyone has any awful experiences (or any good ones for that matter) with them. You should get prices significantly below list price by pursuing this strategy.