Well, you asked for
opinions! So here's my $ 0.00492.
I think the iMac is a risky investment for repair. I'd sell it to almost anyone who would buy it and also pay the shipping. I'd suggest FedEx Ground (since I used to work for FedEx). they will still get it there in a few days and it shouldn't cost anywhere near $100! That sounds more like overnight! UPS might even be a little cheaper.
If your extra monitor is fairly high quality and can use the resolutions* available from the mini, that really sounds like a good choice. I'd still look at an Apple refurb^, however.
* Simultaneously supports up to 1920 by 1200 pixels on a DVI or VGA display
* VGA output using Mini-DVI to VGA Adapter (sold separately) $20 from Apple
^ None listed at this time