This summer a German found a way to have an extended desktop on a Radeon-equipped iBook with an external screen connected (currently OS 9 only). The hack also works on the current 17″ TFT iMac even without the problems noted with the iBook concerning the brightness controls and sleep issue.
Check out the latest news here and on this QuickTime moviertsp://quicktime.mac-tv/iMqacDualDisplay.mov. More details are available on the german site http://www.mac-tv.de.