I installed Mac OS X v10.2 on my PowerBook G3/266 (1 MB L2) with 512 MB of RAM last August and found it was fine for most everything I did (with that system I do web design with GoLive, Photoshop, ImageReady, Acrobat, Illustrator, LiveMotion and OmniWeb).
A few months ago after getting paid for a job I did I bought the Sonnet G4/500 (1 MB of L2) upgrade. After installing it there was a noticeable increase in the speed of the GUI (expected as the GUI in 10.2 uses Altivec). The speed of things like Acrobat and GoLive didn't change much (I was already happy with the snappiness of GoLive 6.0 in 10.2 compared to GoLive 5.0 in 8.6), OmniWeb and Photoshop became much nicer to work in, and Quicktime didn't change that much (it must be trying to use the graphics instead of CPU, which in my case is still a ATI Rage Lite with 4 MB of VRAM).
Overall, it was worth the money. I knew ahead of time that somethings that use Altivec would be enhanced which is why I chose the G4/500 over the G3/500. Knowing I could never upgrade the graphics, the Altivec enabled upgrade seemed like the best way to help the my system.
Important Note: I had never run a Classic OS on my PowerBook. The first operating system I used on it was Mac OS X Server 1.2 (Rhapsody 5.6). I used that until last August when I put Mac OS X v10.2 on it. I didn't install the drivers on the hard drive for Mac OS 9 while installing Mac OS X as I never planned on needing to use the Classic OS on that system. Sonnet's G4/500 needs to copy the ROM from the original G3 processor card to the new G4 processor card. Their utility only works when booted from an Apple hard drive running Mac OS 8.6 - 9.2.2. Fortunately I had an old 2 GB Apple drive and put Mac OS 9.1 on it to do this. I guess they didn't think having a Mac OS 8.6 - 9.2.2 only installation utility would be a problem even though they say their processor works with 10.2.x. Once the G4/500 was up and running, I dropped my old hard drive back in and haven't had any problems since.
The attached image is the results of running SpeedRun on my PowerBook after installing the Sonnet upgrade. They don't actually show any real comparisons on Sonnet's site.