When 10.5 was first released, my primary computer was one of these single 1.25GHz G4s. I installed it on a spare disk to test and switched over to it several months later, and I have no memory of 10.4 performing better or 10.5 feeling slower. I continued to use it happily for another four years or so, although I eventually installed a dual-processor card. Given that experience, I don't really think there's much reason to avoid 10.5 unless you're getting very close to the minimum requirements (say, under 1GHz).
I have very little experience with Power Mac G5s of any kind, but I remember hearing a number of anecdotes from the time about the first G5s, especially the low-end ones, tending to feel less snappy than the last and best G4s at everyday use, even if they were better at specific "pro" tasks. I forget most of the details by now. Either way I doubt you'll notice a massive difference between the two.
I'm partial to the G4 because I lived on one for a long time, but I'm not sure what you intend to do with it. If you want to, the G4 could be expanded a fair way (dual CPUs, USB 2.0, SATA, etc.) for not much money, all of which I did over time. I am not familiar with what kind of worthwhile expansions exist for a single 1.8GHz G5, but it looks like adding a second CPU is not possible, which makes it less interesting in my opinion. I don't recall the G5 being such a significant improvement over the G4 that a single G5 at 1.8GHz offers anything over a pair of G4s at the same clock or even at 1.42 or 1.25GHz.
EDIT: I just took a casual glance at eBay and observed that dual 1.25GHz CPU cards for this machine are very cheap now. If you're patient you may even find better ones.