It's hard to justify spending $500 more when comparing a 12" PB to a 12" iBook.
I'll give it a shot nonetheless.
12" Al PB vs. 12" iBook
867 G4 vs 800 G3
Bluetooth onboard vs none
Airport Extreme vs Airport
133MHz Bus vs 100Mhz Bus
DDR vs SDRAM
ATA 100 vs ATA Ultra 66
GForce 4 420 32MB vs Radeon 7500 32MB
Slot-loading vs. tray
256MB RAM vs 128MB RAM
40GB vs 30 GB drive
Better Speakers (3 vs 2)
Smaller, Lighter
Stunning looks
To justify the higher price, look at what its shipped with: 256 vs 128 RAM and 40 GB vs. 30 GB. I intended to upgrade to 640 RAM and 40 GB anyhow, so that'll cost less with the PB. An iBook with 256 & 40 costs $ 150,- more, so the difference is not $ 500,- but $ 350,-. That can more easily be justified by all the HW extra's (like on-board BlueTooth, external monitor support without hacking) and design improvements (slot loading, 3 speakers, looks).
My own main reason to choose the 12" PB over the iBook is the increase in speed, following from the G4 & 133 MHz bus. Under OS X both should make for a noticeable increase. The DDR and ATA 100 give only a very marginal improvement in the current setup IIRC.
Smaller and lighter is very important to me too since I'm constantly lugging my laptop around, Every improvent in this sense, however small, does pay off.
Moreover (to whom it may concern) the 12" PB has a Combo drive with CD-R 24x CD-RW 10x. The iBook contrariwise a Combo drive with CD-R 16x, CD-RW 8x. They both read DVDs and CDs at the same speed (8x and 24x)
This also could account for a higher price. I think the price/performance is roughly equal for the two, which would justify spending more if you need / can afford more. More is more, isn't it?
BTW. the PB has an audio-in jack port, the iBook supports only USB audio in IIRC.