Unable to upgrade iMac to Snow Leopard

If you are installing windows via bootcamp the two systems will have exclusive use of all resources. You won't have any restrictions on the apps you install other than your existing restrictions of disk space, ram or your graphics processor.

I would suggest upgrading your machine to 4GB of ram as both Snow Leopard and windows 7 like at least 4GB of ram.

While Apple stated that Leopard was required to install Snow Leopard, there was no technical limitation put in place.

From the day it came out Snow Leopard could be installed over top of Tiger or as a clean install. I don't believe Apple has ever released an 'upgrade' OS. The full installs have always been available, at least since OS X.