We've had many topics suggest it, but seen few in the wild: putting a Mac Mini inside a compact Mac case.
The coolest part of this mod (IMHO) is the use of a home-made Atmel microcontroller-based board to translate the original 512 keyboard and mouse to USB.
For reference, I found the link through hack a day
You just beat me posting this. Probably one of the cleanest modernize-a-compact-Mac hacks I've ever seen. The breakout dongles on the back using the original ports is fantastic.