256MB is not so low on Panther. Minimum was 128MB back then, but
512MB+ is still recommended. As for Kernel panics, it could be
low RAM, bad RAM, a software issue, or some other hardware
problem. TCP is spot on about a G4 board and CPU. I suppose you
might get a G5 from an iMac, but you would need most of the rest
of it too. A PowerMac G5 is out of the question, and probably
too pricey at the moment. They are all falling out of warranty
at the moment so the market for spares at non-Apple prices is
going to be fairly strong for a while. Which means parts will be
just below Apple price.  Just get as much RAM as you can for
whatever you end up with, and a bigger HD might make the thing
alot more useful. Depends what you want to do with it really.