First of all, I recommend installing Mac OS X 10.3 Panther. That is probably the fastest, most stable, and full featured OS for your machine.
Installing 768MB is a good thing. You will definitely be able to surf the web and play games. Video editing, not so much, unless you are extremely patient. If you are interested in video editing, you really need a faster computer, newer the better. I would recommend at least a G5 with 1.5 GB of RAM. You could eek out with a G4 and 1 GB of RAM, but exporting the video will be really slow.
I recommend upgrading your RAM to 768 MB and your OS to 10.3 to get the most out of your G3.