That will be changing soon, however. ATI has announced that their next generation Radeon GPU will be able to assist H.264 decoding in hardware. From their press release:
ATI Technologies Inc. solidifies its PC video and display leadership with the first public demonstration of high-definition H.264 video playback with hardware acceleration on the PC platform.The official launch is next week at Computex Taipei 2005.
It is likely that this hardware assist will not reach their lower end GPUs until a few years from now (when today's high end becomes the low end). At that point, it will be time to upgrade to a new 23" dual core G5 iMac. :)