Help a Mac newbie choose - 21.5" i5 or i7?

Hi Guys,
I've been a PC user since the middle ages (not really - 1995 to be exact). I've finally decided to buy a new iMac as I love the simple intuitive nature of the OS. I already own an iPhone 4 and an Apple TV. I love them.
So, it boils down to this. I love the look of the 21.5" - the 27" looks awesome, but I don't have the space for it in my study. My computing requirements are pretty simple; I'd love to be able to have full functionality using: iLife, iWork and iTunes. I currently have:
*about 5,000 songs on iTunes
*11,000 photos and maybe 50 short HD video clips (I use a Canon 550d, capable of 24ffs 1080p)
*a few GB of MS Office documents.
*a 500Gb external hard drive.
*a €2,000 budget.
So, the questions!
a). Will the entry-level 21.5" suffice for my needs, given that I already have a 500Gb external hard drive?
b). Will its 2.5ghz i5 chip run all my apps smoothly, especially 1080p 24fps video clips from my Canon (this is the main reason I'm buying the iMac)
c). Is 4Gb RAM and 500Gb of storage *really* enough, or am I selling myself short for future proofing the machine?
Thank you all for your patience with this Mac newbie!
FrankDaTank.

Frank,
The 21.5 is way more than enough for your needs. You should investigate a couple of things though, first you will need another external HD to use as a backup. Operating without backup is a roll of the dice, get yourself a good quality 1TB drive and you should be set. You can use this for Time Machine, if you're not familiar with TM yet watch Time Machine Tutorial, it's only a couple of minutes long. You can easily find a very high quality 1TB drive in the $100 range. The only brand I'd steer away from is Western Digital, they tend to not work well with Macs.
Start out with 4GB of RAM, if this proves to not be enough upgrading RAM is a 5 minute job, inexpensive and doesn't affect the warranty. You can upgrade to 12GB for as low as $76 which provides a lot of headroom. If that is of interest visit OWC at www.macsales.com, they specialize in Macs, have good prices and excellent support including "how to" videos.
In addition I'd also recommend getting AppleCare. This extends the warranty to 3 full years and provides 3 years of  telephone support. 
Finally I'd recommend bookmarking and visiting:
Lion Setup Assistant tips (you can use this for migrating some of your Windows data over)
Switch 101
Mac 101
Find Out How Video tutorials

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    }//end classThis is my first post so please be gentle...
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    When you choose Java to solve the problems, you need to adapt to the power/strategies/methodology that java offers you, and thats the way for solving problems in Java.
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    Step 2: Execute the new code and
    Step 3: Gimme the dukes.
    Cheers
    $

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