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Today's my mother's birthday, and hey gift is a new iMac.

Her older iMac has a G5 processor, and is thus stuck on Leopard. She also has an older version of iLife.

What will be the best way to transfer the data? Does the migration assistant work well across OS versions and CPU architectures? (I know that for some programs I'll require Rosetta.)

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Does the migration assistant work well across OS versions and CPU architectures?

Yes, this will work just fine. The best way to do it is to get a firewire cable to connect the two iMacs, boot the older iMac into Target Disk Mode, and let the installer on the new iMac perform the migration.

I believe that Rosetta isn't installed by default, but when you try to launch a Power PC app you will be prompted to install it.

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