IMac – Is it possible to use a 21″ iMac as an external monitor from a MacBook Pro via Thunderbolt

I have not seen this. Two things I have tried that help me, however, are:

Pin windows that you want on the side monitor to all spaces

I've often treated my second monitor as more a static workspace that doesn't change no matter what space I'm in. You can do this by

System Preferences --> Expose and Spaces --> Spaces -->

Click "+" under Application Assignments, and add the applications you want to stay on the second monitor to "Every Space".

Run a virtual machine in the second window

Using VMWare I sometimes run Windows or Lion on the second monitor in full screen. Add that virtual machine to "Every Space" as described above, and then within that machine I can use spaces and have it run independently of the primary workspace.

Neither method gives you exactly what you want, but they provide a few other options you might try that will still give your working style a boost.

No, as the first iMac which allows this is the 27-inch Late 2009 iMac, as explained here.

There are, though, some Applications which may achieve something similar, requiring both computers to be connected to the same LAN/WiFi/VPN, and sending all the information, the one to be displayed on the second computer working as a display, through it. Such as ScreenRecycler. You can find some more here.