If I were you, I would keep both systems separate. Edit your old projects with the G4 and any new projects on the new system.
FYI, NEVER use usb drives as a scratch disc. Possible as a boot drive. It’s possible to modify the iMac to include an eSATA port. OWC makes that option.
Used or refurbished Mac Pro/iMacs are an option.
Steve Eisen
Eisen Video Productions
Vice President
Chicago Final Cut Pro Users Group