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I edited a couple HDV projects on my dual G5 and it seemed to work fine also, although as David mentioned, rendering was slow. Make sure you have your clip/capture/sequence settings right. Easiest way to do this is to start FCP and close all projects which are open. Under the FCP menu choose Easy Setup, then pick the one which is correct for your camera.
Now the settings of all new captures and sequences will be in agreement. This doesn't change any existing clips or sequences though, only new ones. My G5 was very similar to yours... 2.5ghz dual with 2.5GB RAM. Unfortunately it died without warning and considering the age I am not inclined to fix it.
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