Apple claims that on all of their specs, but it's actually been revealed to be an ATI Mobility 5730.

In the interest of giving you some kind of guess as to performance, I can share my experiences so far. (keep in mind the iMac is a 3.2ghz i3 with 4GB DDR3 1333) Starcraft 2 runs perfectly on Medium/High mixed. Pretty well on High, actually, but I keep it on Medium for faster load times. I also run Valve games like TF2 and L4D2 pretty well. In bootcamp, running Win7x64, I've run Just Cause 2 with Medium settings with good results. In the end, it's not a card with a lot of raw horsepower, but it's sufficient for the mid-range.

I don't like overclocking GPUs, unless they come that way under warranty, so I don't recommend it. Updating drivers depends on what the release notes say. This is my first ATI card, but Nvidia driver updates usually detail what improvements they've made in specific games. WoW is old, but they might have some Cataclysm-specific notes. You may see increases, but usually not higher than 10%.

My PC's 512mb 8800GT is the most amazing hardware purchase I've ever made. It's running strong after 3 solid years of gaming. If you want bang-for-buck and don't mind buying older tech, your ~$100 could get you a 512MB or 1GB 9800GT, which will be more powerful.