I think most people will agree to what I'm gonna say: MacOS 8.6 is the most reliable System before X ever built. It's fast, it's stable and nearly everything works great on it. I'm still running OS 8.6 on my PowerBook 1400 with 32MB of RAM and a 117MHz PPC-CPU (Will upgrade to G3/233 and 64MB soon, but definitely stick with 8.6). I'd say, for what you're using your computer, OS 8.6 will be perfect (and even faster than 8.0/8.1)
You won't be able to use the iTools though, but if you don't need them it doesn't matter. I'd suggest 8.6, but you can't do wrong with any of them.
About the RAM: For what you need, 64MB will be enough. If you decide to use 9.1 instead of 8.6 though, I'd suggest taking at least another 32MB or even more, so you'll have at 96MB or more.
Btw, a friend of mine has the same iMac you do: G3/233 with 32MB of RAM. And she's running 8.6 on it, with great effort. You might consider updating your OS even before upgrading your iMac.
[ 05-01-2002: Message edited by: D'Espice ]