If you're developing for iOS, you are going to want a more recent machine than that - the 17" iMac dates back past snow leopard and possibly even leopard itself, which you are going to need to run Xcode.
Also, as mentioned above, a 17" screen is likely too small for iOS development to be comfortable - I use a 24" and even then sometimes it's cramped.
Last but not least, to me $500 for long outdated hardware is a lot of cash. Second hand stores are rarely amazingly good deals - they buy cheap and hike up for their own profit. If you are going to go down the second hand route I'd definitely advise going to a private seller (of some level of trust).
If I were you I'd put the bucks into a brand new machine and recover the cost with the app sales, as a new machine will last longer, perform better and definitely accept all the software you need.